Motley Fool take on acquisition: (nothing really new)
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Solectron Gets Smart
By Richard McCaffery (TMF Gibson)
Electronics manufacturing contractor Solectron (NYSE: SLR) signed a $2 billion agreement to buy Smart Modular Technologies (Nasdaq: SMOD), a leading manufacturer of memory modules, memory cards, and embedded computers, in a move aimed at expanding Solectron's global reach and manufacturing capacity. The deal, the biggest ever in the fast-growing electronics manufacturing services industry, also gives Milpitas, California-based Solectron new products to offer customers such as Hewlett-Packard (NYSE: HWP), Cisco (Nasdaq: CSCO), and Compaq Computer (NYSE: CPQ), as well as added manufacturing and design centers in Puerto Rico, Scotland, Malaysia, India, California, and Boston. A diversified product offering and customer base as well as access to worldwide manufacturing and distribution are critical for contract manufacturers, which make money by assembling products for name-brand companies like Cisco. Under the agreement, Smart shareholders will receive 0.51 shares of the highly valued Solectron stock for each issue of Smart. Solectron will issue 23.1 million shares common stock and take responsibility for all stock options held by Smart employees. The merger is expected to be accretive to fiscal 2000 earnings (before transaction charges) by about $0.09 per share. Solectron has been on a contract manufacturing tear since its founding in 1977. Over the last eight years the company has increased sales and net income at a compounded annual growth rate of 54%. Revenue and net income for fiscal 1999 were $8.4 billion and $294 million, respectively. Its growth rate has more than doubled the projected growth rate of the electronics manufacturing services industry as a whole, which is expected to grow at a 25% compound annual rate, from $89.6 billion in 1998 to $178 billion in 2001. Once the merger is complete, Smart will operate as part of Solectron's new technology solutions business unit. Smart chairman and chief executive Ajay Shah will become CEO of the solutions business.
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