Immediately Accretive Transaction Diversifies
Revenue Base and Increases TAM to ~ $5 Billion
- Combined last twelve months (“LTM”)
reported revenue of approximately $828 million and non-GAAP
operating income of approximately $124 million
- Complementary acquisition expected to
create diversified revenue base and expand addressable market to $5
billion
- Increases footprint in high growth
end-markets of automotive, IoT, industrial and mobility
- Estimated to deliver over $20 million
in annual run-rate cost synergies within 2 years
- Expected to be immediately accretive to
non-GAAP earnings per share after closing
Cohu, Inc. (NASDAQ:COHU) and Xcerra Corporation (NASDAQ:XCRA)
today announced they have entered into a definitive merger
agreement pursuant to which Cohu will acquire Xcerra for a
combination of cash and stock. The acquisition is expected to make
Cohu a global leader in semiconductor test, with combined sales for
Cohu and Xcerra in excess of $800 million for the last twelve
months.
Upon the closing of the transaction, Xcerra shareholders will be
entitled to receive $9.00 in cash and 0.2109 of a share of Cohu
common stock, subject to the terms of the definitive agreement.
Based on the closing price of Cohu common stock as of May 7, 2018,
the transaction values Xcerra at $13.92 per share, or approximately
$796 million in equity value, with a total enterprise value of
approximately $627 million, after excluding Xcerra’s cash and
marketable securities net of the debt on its balance sheet as of
January 31, 2018. The transaction value represents a premium of
8.4% to Xcerra's closing price on May 7, 2018, and a premium of
15.4% to Xcerra's 30-day average closing price.
"This proposed acquisition is a powerful combination of two
complementary companies that will accelerate our strategy to
diversify our product offerings and strengthen Cohu’s position as a
global leader in back-end semiconductor equipment. The depth and
breadth of the combined product portfolios, engineering and product
development resources, as well as the global customer support
platforms will enable us to deliver comprehensive semiconductor
back-end solutions that better meet the future needs of our
customers,” commented Luis Müller, Cohu's President and CEO.
Mr. Müller continued, “The acquisition of Xcerra increases our
addressable market to approximately $5 billion across
handlers, contactors, test and inspection, further strengthening
our ability to fully capitalize on the secular growth opportunities
in the automotive, IoT, industrial and mobility markets. We are
excited to welcome the Xcerra team to Cohu and look forward to an
efficient completion of the transaction, with a focus on delivering
long-term value to our customers, employees and shareholders."
Commenting on the proposed acquisition, David Tacelli, Xcerra’s
President and CEO, stated, "We are very pleased to be joining
forces with Cohu to create a global leader in back-end
semiconductor test. Together, we will be an even stronger and more
competitive company with far reaching long-term benefits to our
customers and employees. I am extremely proud of what the Xcerra
team has accomplished over the past several years and look forward
to the exciting possibilities we can achieve together with
Cohu.”
The transaction is expected to be immediately accretive to
non-GAAP earnings per share and generate over $20 million of annual
run-rate cost synergies within 2 years of closing, excluding
stock-based compensation and other charges.
Transaction Details
Cohu intends to fund the cash payable to Xcerra shareholders
with a combination of cash on hand from the combined companies’
balance sheets and approximately $350 million in debt financing.
The transaction is expected to close in the second half of calendar
year 2018, subject to approval by both companies’ respective
shareholders, antitrust regulatory approvals and other customary
closing conditions.
Xcerra shareholders are expected to own approximately 30% of the
combined company upon the closing of the transaction. The
transaction has been unanimously approved by the Boards of
Directors of both companies.
Management and Board of Directors
Luis Müller will remain president and chief executive officer
and lead the combined company, and Jeff Jones will continue to
serve as vice president of finance and chief financial officer. Two
members of Xcerra's board of directors will join Cohu's board upon
the closing of the transaction.
Advisors
Deutsche Bank Securities served as the exclusive financial
advisor to Cohu and Cleary Gottlieb Steen & Hamilton LLP served
as Cohu’s legal advisor. Cowen served as exclusive financial
advisor to Xcerra and Latham & Watkins LLP served as Xcerra’s
legal advisor.
Conference Call and Slide Presentation Information
Cohu will host a conference call and webcast on Tuesday, May 8,
2018, at 5:30 a.m. PDT/8:30 a.m. EDT in conjunction with its
announcement of first quarter 2018 results. The conference call
will be simulcast over the Internet with an accompanying slide
presentation and can be accessed by all interested parties on the
Investor Information section of the Company’s website at
www.Cohu.com. Interested investors and analysts may also dial into
the conference call by using 1-877-407-8031 (domestic) or
+1-201-689-8031 (international).
The teleconference replay will be available through June 8,
2018. The replay dial-in number is 1-877-481-4010 (domestic) or
+1-919-882-2331 (international) using pass code 28490. The webcast
replay will be available on the website through May 8, 2019.
About Cohu
Cohu (NASDAQ:COHU) is a leading supplier of semiconductor test
and inspection handlers, micro-electro mechanical system (MEMS)
test modules, test contactors and thermal sub-systems used by
global semiconductor manufacturers and test subcontractors. For
more information, visit http://www.Cohu.com/.
About Xcerra
Xcerra Corporation (NASDAQ:XCRA) is comprised of four businesses
in the semiconductor and electronics manufacturing test markets:
atg-Luther & Maelzer, Everett Charles Technologies,
LTX-Credence and Multitest. The combination of these businesses
creates a company with a broad spectrum of semiconductor and PCB
test expertise that drives innovative new products and services,
and the ability to deliver to customers fully integrated
semiconductor test cell solutions. Xcerra addresses the broad,
divergent requirements of the mobility, industrial, automotive and
consumer end markets, offering a comprehensive portfolio of
solutions and technologies, and a global network of strategically
deployed applications and support resources. Additional information
can be found at www.Xcerra.com or at each product group’s website;
www.atg-lm.com, www.ectinfo.com, www.ltxc.com and
www.multitest.com.
Use of Non-GAAP Financial Information
Included within this press release are references to non-GAAP
financial measures, including non-GAAP Operating Income and
earnings per share, that supplement the Company's Condensed
Consolidated Statements of Income prepared under generally accepted
accounting principles (GAAP). These non-GAAP financial measures
adjust the Company's actual results prepared under GAAP to exclude
charges and the related income tax effect for share-based
compensation, the amortization of acquired intangible assets,
manufacturing transition costs, employee severance costs,
acquisition related costs, fair value adjustment to contingent
consideration, purchase accounting inventory step-up included in
cost of sales, the reduction of an uncertain tax position liability
and related indemnification receivable and U.S. Tax Reform.
Reconciliations of GAAP to non-GAAP amounts for the periods
presented herein are provided in schedules accompanying this
release and should be considered together with the Condensed
Consolidated Statements of Income.
These non-GAAP measures are not meant as a substitute for GAAP,
but are included solely for informational and comparative purposes.
The Company's management believes that this information can assist
investors in evaluating the Company’s operational trends, financial
performance, and cash generating capacity. Management believes
these non-GAAP measures allow investors to evaluate Cohu’s
financial performance using some of the same measures as
management. However, the non-GAAP financial measures should not be
regarded as a replacement for (or superior to) corresponding,
similarly captioned, GAAP measures.
Cohu
Xcerra Combined
Operating Income
Reconciliation
LTM EndingMarch
31,2018
% of Net Sales
LTM EndingJanuary
31,2018
% of Net Sales LTM % of Net
Sales Income From Operations - GAAP $36,741 10.0%
$58,279 12.6% $95,020 11.5% Amortization of Purchased Intangible
Assets 4,767 1.3% 601 0.1% 5,368 0.6% Share Based Compensation
6,364 1.7% 7,296 1.6% 13,660 1.6% Manufacturing Transition and
Severance Costs 385 0.1% 0 0.0% 385 0.0% Restructuring and Related
Provisions 0 0.0% 1,590 0.3% 1,590 0.2% Other Acquisition Costs 479
0.1% 3,754 0.8% 4,233 0.5% Inventory Step-Up 1,057 0.3% 0 0.0%
1,057 0.1% Impairment of Land Held for Sale 0 0.0% 100 0.0% 100
0.0% Reduction of Indemnification Receivable 1,172 0.3% 0 0.0%
1,172 0.1% Adjustment to Contingent Consideration 1,276 0.3% 0 0.0%
1,276 0.2%
Income From Operations - Non-GAAP $52,241 14.2%
$71,620 15.5% $123,861 15.0%
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements contained in this filing may be considered
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, including statements
regarding the proposed transaction involving Cohu, Inc. (“Cohu”)
and Xcerra Corporation (“Xcerra”) and the ability to consummate the
proposed transaction. Forward-looking statements generally include
statements that are predictive in nature and depend upon or refer
to future events or conditions, and include words such as “may,”
“will,” “should,” “would,” “expect,” “anticipate,” “plan,”
“likely,” “believe,” “estimate,” “project,” “intend,” and other
similar expressions among others. Statements that are not
historical facts are forward-looking statements. Forward-looking
statements are based on current beliefs and assumptions that are
subject to risks and uncertainties and are not guarantees of future
performance. Actual results could differ materially from those
contained in any forward-looking statement as a result of various
factors, including, without limitation: (i) the risk that the
conditions to the closing of the proposed transaction are not
satisfied, including the failure to timely or at all obtain
stockholder approval for the proposed transaction or the failure to
timely or at all obtain any required regulatory clearances,
including under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (HSR); (ii) uncertainties as to the timing of the consummation
of the proposed transaction and the ability of each of Cohu and
Xcerra to consummate the proposed transaction, including as a
result of the failure of Cohu to obtain or provide on a timely
basis or at all the necessary financing; (iii) the ability of Cohu
and Xcerra to integrate their businesses successfully and to
achieve anticipated synergies; (iv) the possibility that other
anticipated benefits of the proposed transaction will not be
realized, including without limitation, anticipated revenues,
expenses, earnings and other financial results, and growth and
expansion of the combined company’s operations, and the anticipated
tax treatment of the combination; (v) potential litigation relating
to the proposed transaction that could be instituted against Cohu,
Xcerra, or their respective directors; (vi) possible disruptions
from the proposed transaction that could harm Cohu’s and/or
Xcerra’s respective businesses; (vii) the ability of Cohu or Xcerra
to retain, attract and hire key personnel; (viii) potential adverse
reactions or changes to relationships with customers, employees,
suppliers or other parties resulting from the announcement or
completion of the proposed transaction; (ix) potential business
uncertainty, including changes to existing business relationships,
during the pendency of the proposed transaction that could affect
Cohu’s or Xcerra’s financial performance; (x) certain restrictions
during the pendency of the proposed transaction that may impact
Cohu’s or Xcerra’s ability to pursue certain business opportunities
or strategic transactions; (xi) the adverse impact to Cohu’s
operating results from interest expense on the financing debt,
rising interest rates, and any restrictions on operations related
to such debt; (xii) continued availability of capital and financing
and rating agency actions; (xiii) legislative, regulatory and
economic developments; (xiv) unpredictability and severity of
catastrophic events, including, but not limited to, acts of
terrorism or outbreak of war or hostilities, as well as
management’s response to any of the aforementioned factors; and
(xv) such other factors as are set forth in (A) Cohu’s periodic
public filings with the Securities and Exchange Commission (the
“SEC”), including but not limited to those described under the
heading “Risk Factors” in Cohu’s Form 10-K for the fiscal year
ended December 31, 2017, (B) Xcerra’s periodic public filings with
the SEC, including but not limited to those described under the
heading “Risk Factors” in Xcerra’s Form 10-K for the fiscal year
ended July 31, 2017, (C) in the Registration Statement on Form S-4
(the “Registration Statement”) that has or will be filed by Cohu
with the SEC containing a prospectus with respect to the Cohu
common stock to be issued in the proposed transaction and a joint
proxy statement of Cohu and Xcerra in connection with the proposed
transaction (the “Joint Proxy Statement/Prospectus”) that is or
will be contained therein, and (D) the other filings made by Cohu
or Xcerra with the SEC from time to time, which are available via
the SEC’s website at www.sec.gov. Neither Cohu nor Xcerra can give
no assurance that the conditions to the proposed transaction will
be satisfied. Except as required by applicable law, neither Cohu
nor Xcerra undertakes any obligation to revise or update any
forward-looking statement, or to make any other forward-looking
statements, whether as a result of new information, future events
or otherwise.
Participants in the Solicitation
Cohu, Xcerra, certain of their respective directors, executive
officers, members of management and employees may, under the rules
of the SEC, be deemed to be participants in the solicitation of
proxies in connection with the proposed transaction. Information
regarding the persons who may, under the rules of the SEC, be
deemed “participants” in the solicitation of proxies in connection
with the proposed transaction, and a description of their direct
and indirect interests in the proposed transaction, which may
differ from the interests of Xcerra stockholders or Cohu
stockholders generally, is set forth in the Joint Proxy
Statement/Prospectus filed with the SEC. Information regarding
Xcerra’s directors and executive officers and their beneficial
ownership of Xcerra common stock is also set forth in Xcerra’s
proxy statement on Schedule 14A filed with the SEC on September 5,
2017, and in its Annual Report on Form 10-K for the year ended July
31, 2017, and is supplemented by other public filings made, and to
be made, with the SEC by Xcerra. These documents are available free
of charge at the SEC’s website at www.sec.gov or by visiting the
Xcerra Investor Relations page on its corporate website at
https://Xcerra.com/investors. Information concerning Cohu’s
directors and executive officers and their beneficial ownership of
Cohu’s common stock is set forth in Cohu’s annual proxy statement
on Schedule 14A filed with the SEC on April 3, 2018, and in its
Annual Report on Form 10-K for the year ended December 31, 2017.
These documents are available free of charge at the SEC’s website
at www.sec.gov or by visiting the Cohu Investor Relations page on
its corporate website at https://Cohu.gcs-web.com. Other
information regarding the participants in the proxy solicitations
and a description of their direct and indirect interests, by
security holdings or otherwise, are contained in the Joint Proxy
Statement/Prospectus regarding the proposed transaction and other
relevant materials that have been or will be filed with the SEC
when they become available. You may obtain copies of the documents
described in the preceding sentence when they become available free
of charge by visiting the SEC’s website at www.sec.gov.
Additional Information and Where You Can Find It
Cohu will file with the SEC the Registration Statement
containing the Joint Proxy Statement/Prospectus and other documents
concerning the proposed transaction. The definitive Joint Proxy
Statement/Prospectus will be delivered to the stockholders of
Xcerra and Cohu after the Registration Statement is declared
effective by the SEC. This communication is not a substitute for
the Registration Statement, the definitive Joint Proxy
Statement/Prospectus or any other documents that Xcerra or Cohu may
file or may have filed with the SEC, or will send or have sent to
stockholders in connection with the proposed transaction. INVESTORS
AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and
security holders may obtain a free copy of these documents (when
they become available) and other documents filed by Xcerra and Cohu
with the SEC at the SEC’s website at www.sec.gov. The Joint Proxy
Statement/Prospectus and other documents filed by Xcerra or Cohu
may also be obtained free of charge by visiting the Xcerra Investor
Relations page on its corporate website at
https://Xcerra.com/investors or by contacting Xcerra Investor
Relations by telephone at (781) 467-5063 or by mail at Xcerra
Investor Relations, Xcerra Corporation, 825 University Avenue,
Norwood, MA 02062, attention Rich Yerganian or by visiting the Cohu
Investor Relations page on its corporate website at
https://Cohu.gcs-web.com or by contacting Cohu Investor Relations
by telephone at (858) 848-8106 or by mail at Cohu Corporate
Headquarters, 12367 Crosthwaite Circle, Poway, CA 92064, attention
Jeffrey D. Jones.
For press releases and other information of interest to
investors, please visit Cohu’s website at www.Cohu.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180508005677/en/
Cohu, Inc.Jeffrey D. Jones, CFO, 858-848-8106
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