Flextronics International Ltd, the world's No. 2 contract electronics maker, is buying smaller rival Solectron Corp for US$3.6 billion in cash and stock in a takeover that analysts say is fueled by fierce global competition that is driving down prices and squeezing already razor-thin profit margins.
Singapore-based Flextronics said on Monday that Solectron investors will have two options for converting their shares, either a cash payment of US$3.89 per share, a 15 percent premium over Friday's closing price of US$3.37 on the New York Stock Exchange, or 0.345 share of Flextronics for each Solectron share, which is a 20 percent premium.
No less than 50 percent and no more than 70 percent of Solectron's stock will be converted into Flextronics stock, the companies said in a joint statement before the markets opened.
Flextronics said it expects to identify some US$200 million in cost savings from the acquisition, which will boost earnings per share by about 15 percent once the two companies are fully integrated, which could take up to two years. The acquisition is expected to close by the end of this calendar year.
The combined company will have more than US$30 billion in annual sales, which analysts said will help Flextronics close the gap with Taiwan-based Hon Hai Precision Industry Co (
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