SMART Global Holdings, Inc. (“SGH” or the “Company”) (NASDAQ:
SGH) today announced that the Company, through its wholly owned
subsidiary SMART Modular Technologies (LX) S.à.r.l., has entered
into an agreement to sell an 81% interest in SMART Modular
Technologies do Brasil – Indústria e Comércio de Componentes Ltda.
(“SMART Brazil”) to Lexar Europe B.V., an affiliate of Shenzhen
Longsys Electronics Co., Ltd. for approximately $166 million in
cash consideration. The purchase price values 100% of SMART Brazil
at an initial enterprise value of $205 million.
SMART Brazil operates as a stand-alone business focused on the
Brazil market. It assembles and tests modules for electronics
manufacturers that sell devices to Brazilian consumers. These
manufacturers turn to SMART Brazil for reliable, standards-based
modules that are assembled in Brazil.
“The majority divestiture of our standards-based, commodity
module business in Brazil will enable SGH to focus on our strategy
of delivering high-performance, high-availability solutions to our
enterprise customers,” said Mark Adams, chief executive officer of
SGH. “This transaction will strengthen our financial position,
enabling us to increase our strategic investments into domestic
research and development, and US-based production of advanced
technologies.”
Transaction Summary
Under the terms of the agreement, the purchase price values 100%
of SMART Brazil at an initial enterprise value of $205 million.
This amount has two separate components, an upfront value of $170
million and a deferred value of $35 million.
At closing, SGH will receive an upfront cash purchase price of
$137.7 million (81% of $170 million), subject to certain customary
adjustments, for 81% of SMART Brazil’s outstanding equity. Eighteen
months following the closing SGH will receive a deferred cash
payment of $28.35 million (81% of $35 million).
In addition to the upfront and deferred cash payments, SGH will
retain a 19% interest in SMART Brazil. During three exercise
windows between 2027 and 2029, the parties have a put and call
feature for the remaining stake at a put/call price that values
100% of the Brazil business at 7.5x its fiscal year net income. For
example, if the put/call were exercised in 2027, the referenced net
income would be fiscal year 2026. SGH would receive 19% of such
value at, and subject to, the exercise of the put or call.
The transaction is expected to close by the end of calendar year
2023, subject to required regulatory approvals and satisfaction of
customary closing conditions.
SGH expects this transaction to be accretive to its non-GAAP
gross margins immediately post-closing; for reference, sales for
SMART Brazil were approximately $114 million for the first half of
SGH's fiscal 2023. In connection with the transaction, SGH expects
to recognize a number of one-time items, including
transaction-related costs as well as a non-cash charge to
operations for the accumulated translation adjustment balance
related to the deconsolidation of the operations of SMART
Brazil.
Third Quarter Fiscal 2023 Quarterly Financial Conference
Call
During SGH’s third quarterly fiscal 2023 earnings webcast and
conference call scheduled after market close on Thursday, June 29,
2023, the leadership team will discuss the SMART Brazil
divestiture.
- Date: Thursday, June 29, 2023
- Time: 1:30 p.m. Pacific Daylight Time (PDT)/4:30 p.m.
Eastern Daylight Time (EDT)
- Webcast Information: To access the live webcast, visit:
SGH Q3 FY23 Earnings Call Webcast
- Conference Call Information: Participants may also
listen to the conference call by dialing: +1 833 470 1428
(domestic) or +1 929 526 1599 (international), using the access
code 177936.
- Replay Information: An archived version of the webcast
will be available on the SGH investor relations website for
approximately one year after the webcast date at
https://ir.sghcorp.com. In addition, a telephonic replay of the
call will be accessible for one week after the conference call by
dialing +1 866 813 9403 (domestic) or +44 204 525 0658
(international), using the access code 925273.
Advisors
In connection with the transaction, Bank Itau is acting as
financial advisor and Latham & Watkins LLP is acting as legal
advisor to SGH.
Use of Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including but not limited to, statements concerning or
regarding the divestiture and other transactions contemplated by
the agreement, including SGH’s business strategy and plans and
objectives for future operations following the divestiture, the
expected timing of the closing of the divestiture, the anticipated
impact of the divestiture on SGH’s non-GAAP gross margins
immediately post-closing and the expected recognition of certain
one-time items.
These statements can be identified by the fact that they do not
relate strictly to historical or current facts. Forward-looking
statements often use words such as “anticipate,” “target,”
“expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” “could,”
and other words of similar meaning. Forward-looking statements
provide SGH’s current expectations or forecasts of future events,
circumstances, results or aspirations and are subject to a number
of significant risks, uncertainties and other factors, many of
which are outside of SGH’s control, including but not limited to
inability to obtain or delays in obtaining all regulatory approvals
and otherwise completing all steps required to consummate the
transactions contemplated by the agreement; issues, delays or
complications in consummating the transactions contemplated by the
agreement; incurring unanticipated costs in consummating the
transactions contemplated by the agreement; risks and uncertainties
relating to the operations of the business post-closing; global
business and economic conditions and growth trends in technology
industries; uncertainties in the geopolitical environment;
uncertainties in the global macroeconomic environment; changes in
currency exchange rates; and changes to applicable tax regimes or
rates. These risks, uncertainties and factors could cause SGH’s
actual results to differ materially from those set forth in such
forward-looking statements. These and other risks, uncertainties
and factors are described in greater detail under the section
titled “Risk Factors” contained in the Company’s Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q and the Company’s
other filings with the U.S. Securities and Exchange Commission. In
addition, such risks, uncertainties and factors as outlined above
and in such filings do not constitute all risks, uncertainties and
factors that could cause actual results of SGH to be materially
different from such forward-looking statements. Accordingly,
investors are cautioned not to place undue reliance on any
forward-looking statements. Any forward-looking statements that the
Company makes in this press release are made pursuant to the
Private Securities Litigation Reform Act of 1995, as amended, and
speak only as of the date of this press release. Except as required
by law, SGH does not undertake to update the forward-looking
statements contained in this press release to reflect the impact of
circumstances or events that may arise after the date that the
forward-looking statements were made.
About SGH
At SGH, we design and develop high-performance,
high-availability, enterprise solutions that help our customers
solve for the future. Across our computing, memory, and LED lines
of business, we focus on serving our customers by providing deep
technical knowledge and expertise, custom design engineering,
build-to-order flexibility, and a commitment to best-in-class
quality.
Learn more about us at SGHcorp.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20230613559265/en/
Investor Contact Suzanne Schmidt Investor Relations
ir@sghcorp.com
PR Contacts Valerie Sassani VP Marketing &
Communications pr@sghcorp.com
John Christiansen FGS Global SGH@fgsglobal.com
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