19 August 2011

Cree acquires Ruud Lighting

Cree Inc of Durham, NC, USA (which makes LED chips, lamps and lighting fixtures as well as gallium nitride and silicon carbide power-switching and RF/wireless microelectronic devices and SiC substrates) has acquired LED outdoor lighting firm Ruud Lighting Inc for an estimated net cost of about $525m.

Cree reckons that combining two highly complementary LED firms will help it to drive adoption of energy-efficient LED lighting. The shared focus on LED-based systems has led to thousands of LED lighting installations over the past several years.

The acquisition focuses on indoor and outdoor LED lighting, aiming to accelerate adoption and expand the market for both Cree's LED systems and components. Other synergies include increased access to the lighting market through expanded sales channels, and operating leverage from increased economies of scale. Cree says that, through a broader presence in the lighting systems market, it gains additional expertise to develop next-generation lighting-class LED components.

Ruud will continue to be based in Racine, WI, USA and will operate as a subsidiary of Cree's lighting business. Also, Alan Ruud has joined the Cree board. Ruud, through its BetaLED product line, was one of the first traditional lighting companies to transform most of its business to LED-based systems.

Cree has acquired all of the outstanding stock of Ruud Lighting for an estimated net cost of $525m, consisting of $372m in cash, $211m in stock (valued at the current market closing price of $34.74/share), $85m paid concurrently with the acquisition to retire outstanding debt, offset by tax benefits. The stock portion consists of 6,074,833 Cree shares. The acquisition was structured for tax purposes as a deemed asset purchase, so the cost to Cree will be offset by $143m of expected future tax benefits related to the acquisition.

Ruud's financial and operating results will be consolidated for the balance of Cree's fiscal first-quarter 2012, and Cree is revising its targets for this quarter. These include about 40% of a full quarter's results from Ruud. Cree now targets revenue of $265¬-275m with GAAP gross margin of 37-38% and non-GAAP gross margin at the low end of the previously targeted 38-39%. GAAP operating expenses are now targeted to rise by about $13m from the prior quarter to $88m ($69m on a non-GAAP basis). The tax rate for fiscal Q1 is now targeted at 21.5%. GAAP net income (including expenses related to the transaction) is targeted at $9-12m ($0.08-0.11 per diluted share). Non-GAAP net income is targeted at the low end of the previously target $28-31m ($0.25-0.28 per diluted share). Cree targets this transaction to be slightly dilutive to GAAP earnings for the balance of fiscal 2012 and accretive to non-GAAP earnings for the balance of fiscal 2012.

Tags: Cree LEDs

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