DURHAM – Cree is continuing its transformation to a company more focused on its semiconductor and power supply business by selling its Lighting Products business group for as much as $310 million.
And investors love the decision.
Cree (Nasdaq: CREE) stock immediately jumped 3 percent to more than $55 in premarket trading on Wall Street. By early afternoon, shares were up more than 7 percent, hitting a new one-year-high of $57.19.
Five years ago Cree’s top price was just under $50. In recent months the stock has been climbing pretty consistently, topping $50 on Feb. 1.
The deal was announced early Friday before the markets opened.
Buying the group is Ideal Industries.
“Cree has made significant progress over the last 18 months in sharpening the focus of our business to become a semiconductor powerhouse in Silicon Carbide and GaN technologies,” said Cree CEO Gregg Lowe, who has reshaped the company since taking over from Chuck Swobodoa as the top executive. Lowe was named to the job in September 2017.
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“Over that time frame, we have grown Wolfspeed by more than 100%, acquired the Infineon RF business, more than doubled our manufacturing capacity of Silicon Carbide materials, and signed multiple long-term supply agreements, which, in aggregate, are in excess of $500 million.”
Lowe has made clear his new emphasis on Wolfspeed, which Swoboda had tried to sell and then pulled back from a deal due to government regulatory concerns.
“With the addition of today’s lighting divestiture news, Cree is well positioned as a more focused semiconductor leader,” Lowe added.
“Cree’s technologies are at the forefront of the automotive industry’s transition to zero emission electric vehicles, the telecommunications industry’s move to faster 5G networks and the continued ramp up of LEDs for specialty applications. Our leadership in Silicon Carbide and GaN position us well to capitalize on the tremendous advantages that these technologies offer our customers.”
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Lowe sees Cree’s future resting on Wolfspeed’s capabilities in a variety of areas, such as electric vehicles, and in chips for wireless 5G infrastructure.
“This transaction provides significant resources to help accelerate Wolfspeed’s growth while providing a terrific growth opportunity for the Lighting Business and its employees through an expanded channel that strengthens its market position,” Lowe explained in the announcement.
“We believe this decision benefits the company and our employees, shareholders and customers as it unlocks value, increases management focus on the core business and supports our mission to accelerate silicon carbide adoption.”
The Lighting Products unit includes LED lighting fixtures, lamps, and lighting solutions.
Financial terms include a $310 million including $225 million in cash well as contingencies and assumption of “certain liabilities,” Cree said.
“Our combined technology and expertise will continue to build on Cree Lighting’s history of leadership and fits with the advanced systems IDEAL has pioneered over the past 103 years,” said Jim James, Chairman and CEO of Ideal. “Together, we will create a powerful combination of innovation, channel strength and operational excellence. We’re acquiring a very special business poised for sustained success, and we look forward to assisting Cree Lighting in realizing its potential.”
The deal is expected to close later this year.
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