Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM), which trades as TowerJazz, announced to the stock exchange this morning that it had signed a non-binding term sheet for the purchase of Micron Technology’s fabrication facility in Nishiwaki City, Hyogo, Japan. "Globes" first reported the pending transaction at the end of February.
Tower says that the proposed purchase will nearly double its current internal manufacturing capacity, increasing production by 60,000 wafers per month. According to the company, the availability of additional capacity, combined with the additional business potential in Japan, will help it to achieve its goal of $1 billion annual revenue by 2014.
As part of the proposed acquisition, the companies anticipate that they will sign a supply agreement for Tower to manufacture products for Micron in the Japan facility for approximately the next three years. The facility can support geometries down to 95nm and can also be used to manufacture other products using TowerJazz process technologies. TowerJazz says that it plans to quickly qualify its core power management platforms to serve the substantial growth demand from its Korean customers and then build high end RF capabilities.
According to Tower's announcement, the total value of the proposed transaction, including assumed liabilities, will be approximately $140 million, of which $40 million will be paid in cash. Approximately 20 million of Tower ordinary shares will be issued to Micron Technology or its Japanese subsidiary at $1.42 per share, and the remainder is assumed long-term retirement liabilities. Micron will thereby become a party at interest in Tower, with a holding of more than 5% of the voting shares. The parties are currently negotiating definitive agreements for the proposed transaction.
TowerJazz CEO Russell Ellwanger said, “Previously, I’ve had many detailed interactions with the Micron R&D and operational groups when I held a position with a semiconductor equipment manufacturer. Micron’s culture of innovation, efficiency and absolute integrity is best-in-class, and I am confident that the acquisition of an operation that has grown through the Micron culture will be greatly accretive to TowerJazz. We are excited with the opportunity to enter into a multi-year supply agreement with Micron and see this as the first step in a long-term partnership. The acquisition of a fab in Japan would be a strategic move by TowerJazz to enter the Japanese market and strengthen our presence in the Asia-Pacific region through local, high quality manufacturing capabilities and, in addition, would provide us with needed, large scale incremental capacity.”
“This proposed transaction would provide a long-term bridge toward a successful future for the Nishiwaki site,” said Steve Appleton, Micron Chairman and CEO. “Russell and his team have demonstrated an ability to grow the company and achieve positive financial results for shareholders. We look forward to being both a shareholder and working with them in this endeavor and beyond.”
At the end of 2010, Tower had $198 million cash, after generating positive cash flow during the year and raising $100 million in a bond offering in the fourth quarter. The company had revenue of $509.3 million in 2010, and posted a GAAP loss of $42.4 million. Excluding non-cash expenses, the company made a profit of $129.1 million. It has a market cap of $348 million.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2011
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