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How Flextronics Acquired Solectron in a $3.6 Billion Deal

Flextronics' 2007 Solectron acquisition was announced at about $3.6 billion in equity value, with shareholder elections for cash or stock constrained by deal-wide limits. The merger closed on October 1, 2007.
From TheFinanceBase Team3 min to read
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Flextronics announced its agreement to acquire Solectron on June 4, 2007, at an announced equity value of about $3.6 billion. That was a share-price-based valuation, not a fixed cash purchase price: Solectron shareholders could elect cash or Flextronics shares, subject to limits that could change how their consideration was allocated. The merger closed on October 1, 2007, with Flextronics paying about $1.07 billion in cash and issuing about 221.8 million ordinary shares.

How much did Flextronics pay for Solectron?

The companies announced an equity value of approximately $3.6 billion on June 4, 2007, using Flextronics’ June 1 closing share price. Solectron’s SEC-filed merger materials gave scenario values of approximately $3.603 billion to $3.630 billion, depending on the cash-and-stock mix and reference share prices. The headline figure therefore described the deal’s announcement-date equity valuation, not a fixed cash amount paid at closing. Flextronics and Solectron announcement; SEC-filed merger materials.

What was delivered at closing?

Flextronics’ October 1, 2007 Form 8-K reported approximately $1.07 billion in cash paid and approximately 221.8 million Flextronics ordinary shares issued. Those are the reported closing amounts, distinct from the approximately $3.6 billion announcement valuation. Flextronics Form 8-K, October 1, 2007.

How were Solectron shareholders paid?

For each Solectron common share, the merger agreement offered a choice of 0.3450 Flextronics ordinary share or $3.89 in cash. But elections were subject to an aggregate limit: between 50% and 70% of the consideration had to be paid in Flextronics shares, with the balance in cash. As a result, an individual shareholder’s election could be prorated to meet the deal-wide mix requirements. SEC-filed merger materials.

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The final election results illustrate the effect. Of outstanding Solectron shares, 79.0% had valid stock elections, 8.9% had valid cash elections, and 12.2% had no valid election. Because the agreement capped the stock portion, stock electors received shares for approximately 88.66% of the shares they submitted and cash for approximately 11.34%; cash electors received cash for all their shares. Flextronics final election results, October 2, 2007.

When did Flextronics buy Solectron?

Flextronics announced the definitive agreement on June 4, 2007, and expected the transaction to close by the end of that calendar year, subject to customary conditions. The shareholders of both companies approved the deal on September 27. Flextronics completed the merger on October 1, 2007. June 4 announcement; September 27 shareholder approval announcement; October 1 closing Form 8-K.

The FTC’s early-termination notice record for the transaction is dated July 16, 2007. Singapore’s competition regulator also maintains a closed consultation record concerning the proposed merger. These records establish review activity, but do not by themselves provide a complete account of every jurisdiction’s process or substantive findings. FTC early-termination notice; Singapore competition regulator consultation record.

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Why did Flextronics acquire Solectron?

Flextronics and Solectron presented the merger as a way to combine design resources with end-to-end manufacturing and supply-chain services. Their announcement pointed to greater scale in manufacturing, logistics, procurement, design, engineering, and original design manufacturing (ODM) services. They projected that the combined company would have roughly 200,000 employees and annual revenue above $30 billion. Those were company forecasts made in June 2007, not independently verified post-merger results. June 4, 2007 company announcement.

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The companies also described expected customer benefits, including broader product-development support, supply-chain management, quality, and faster time to market. Solectron executive vice president and interim chief executive officer Paul Tufano said at the time that Flextronics’ track record, complementary market positions, balance sheet, and reputation made the combination attractive for customers, shareholders, and employees. That was Tufano’s view at announcement time; statements about synergies and benefits were forward-looking expectations, not evidence that those outcomes were achieved. The cited deal records do not establish whether the anticipated synergies or customer results ultimately materialized. SEC-filed announcement and forward-looking statements.

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