LED chipmaker Lextar Electronics Corp’s (隆達電子) board has agreed to sell a 13 percent stake to US company Cree Inc for US$83 million in a joint effort to build a stronghold in the fast-growing LED lighting market, the Taiwanese firm said yesterday.
Lextar said Cree has offered to buy 83 million new common shares of the Hsinchu-based company at NT$30 per share, representing a 1.45 percent premium compared with Lextar’s closing price of NT$28.55 on Tuesday.
The deal will make the US firm the second-biggest stakeholder in the LED chipmaker after AU Optronics Corp (友達光電).
Lextar and Cree are also to enter into a long-term LED chip supply partnership, as well as into an agreement for some of Cree’s intellectual property in LED chips and components, according to a joint statement.
“The collaboration with Cree will help Lextar develop its efforts to tap the LED lighting sector, as well as have stable chips export figures,” Lextar chief financial executive Chang Bo-yi (張博儀) said in a statement filed with the Taiwan Stock Exchange before the stock market opened yesterday.
The deal has been approved by the companies’ boards and is to be finalized by the end of the year, subject to the approval of Lextar’s shareholders at an extraordinary shareholders’ meeting set for Oct. 14, as well as a review by the Investment Committee, Lextar said.
Market researcher TrendForce Corp (集邦科技) said the partnership came as a surprise, but that the strategic pairing would help Cree improve its cost structure and thereby secure its market share.
For Lextar, the investment would help it obtain “the capital to expand capacity and to secure an export market,” TrendForce analyst Roger Chu (儲余超) said in a report released yesterday.
Lextar makes LED chips, light sources, light modules and provides LED packaging services. The company has long been an original-equipment manufacturing service provider for Cree and Osram GmbH. It operates as many as 80 metal organic chemical vapor deposition machines to make LEDs, according to TrendForce.
According to its Web site, Cree is a market leader in lighting-class LEDs, LED lighting and semiconductor solutions for wireless and power applications.
Yuanta Investment Consulting (元大投顧) analyst Andrew Chen (陳治宇) said the tie-up would help North Carolina-based Cree drive down the prices of its LED lighting products rapidly to boost the adoption of energy-saving lighting equipment, while Lextar would benefit via a growth in shipments.
“As Cree becomes a key LED lighting customer for Lextar, this [deal] should help drive sales growth [for Lextar],” Chen said in a research note yesterday.
In the first seven months of the year, the chipmaker posted accumulated revenue of NT$8.43 billion (US$281 million), a rise of 4.92 percent from a year earlier, company data showed.
However, Chen warned that Lextar could lose orders from its other customers, saying they might choose to use the firm “less” for strategic reasons.
“The impact of the agreement will need to be monitored,” he said.
Lextar shares rallied 6.83 percent to NT$30.5 yesterday, outperforming the TAIEX’s 0.98 percent gain.
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