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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector
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To: rich evans who wrote (2463)10/31/2000 4:17:33 PM
From: MGV  Read Replies (2) of 2542
 
From Bear Stearns:

Assuming NEL's publicly announced (on October 19) revenue guidance of > S$4.25 billion (roughly US$2.4 billion) in 2000, Solectron is paying 1.0x on a price/sales basis. We believe that this compares favorably to other
> recent transactions involving major EMS targets with revenues in excess of > $500 million (Solectron/Smart Modular - 1.8x, Flextronics/Dii Group - > 1.8x, Flextronics/JIT Holdings - 1.1x). We believe that this was an > opportunistic move by Solectron, given that NEL's stock has been trading > near the bottom of its 52-week range (high of US$7.27, low of US$1.61), > until last week, when rumors about the deal began to surface. The US$4.53
> purchase price is still at a 38% discount to its 52-week high, but at a > 75% premium to yesterday's close.
>
> Financial Impact of the Acquisition
> We believe the acquisition is neutral to Solectron's fiscal 2001 (ending > August) EPS. Assuming calendar 2000 earnings of US$33 million from NEL > (based on the first half results of calendar 2000) and 25% growth for 2001
> (in-line with recent NEL management comments of EPS growth in excess of > 25%-30% revenue growth), we believe that NEL would add roughly US$0.06 to > our fiscal 2001 GAAP EPS estimate of US$1.26 for Solectron. However, this
> would be offset by roughly US$0.06 in lost after-tax interest income, > making the acquisition roughly neutral to our fiscal 2001 estimate. At > the end of the August quarter, Solectron had US$2.43 billion in cash on > hand.
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