Business | Company News | Divestment | Mar 21, 2019

Another LED Manufacturer Drops Its Lighting Unit: Cree to Sell Lighting Business to Ideal Industries

Cree, Inc. announces the execution of a definitive agreement to sell its Lighting Products business unit ("Cree Lighting"), which includes the LED lighting fixtures, lamps and corporate lighting solutions business for commercial, industrial and consumer applications, to IDEAL INDUSTRIES, INC. for approximately $310 million before tax impacts, including up-front and contingent consideration and the assumption of certain liabilities. Cree expects to receive an initial cash payment of $225 million, subject to purchase price adjustments, and has the potential to receive a targeted earn-out payment of approximately $85 million based on an adjusted EBITDA metric for Cree Lighting over a 12-month period beginning two years after the transaction closes.

The agreement continues Cree's strategy, announced in February 2018, to create a more focused, powerhouse semiconductor company, providing growth capital for Wolfspeed, its core Power and RF business, and equips Cree with additional resources to expand its semiconductor operations. The deal also enables Cree Lighting to gain additional global focus, channel support and investment as it becomes a growth engine for the IDEAL team.

"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. 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. With the addition of today's lighting divestiture news, Cree is well positioned as a more focused semiconductor leader," said Gregg Lowe, CEO of Cree.  "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. 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. 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."

IDEAL is a fourth-generation, family-owned, growing global company, serving as a market leader in electric power control and management. Cree Lighting's portfolio and SmartCast® Technology are complementary to IDEAL's advanced control business and channel of suppliers, distributors, agents, and customer relationships.

"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 INDUSTRIES, INC. "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 closing of the transaction is anticipated to occur in the fourth quarter of fiscal 2019, and is subject to receipt of required regulatory approvals and satisfaction of customary closing conditions.

FY19 Q3 Business Update:

Based on the agreement to sell Cree Lighting, it will be classified as discontinued operations as of FY19 3Q. As a result, Cree is updating its guidance to reflect continuing operations only.

For its third quarter of fiscal 2019 ending March 31, 2019, Cree targets revenue from continuing operations in a range of $271 million to $277 million. Wolfspeed revenue is targeted in a range of $139 million to $141 million, and LED Products revenue is targeted in a range of $132 million to $136 million. GAAP gross margin from continuing operations is targeted at approximately 35%, with non-GAAP gross margin from continuing operations targeted at approximately 36%. GAAP net loss from continuing operations is targeted at $(14) million to $(9) million, or $(.14) to $(.09) per diluted share. Non-GAAP net income from continuing operations is targeted to be in a range of $14 million to $18 million, or $0.14 to $0.18 earnings per diluted share. Targeted non-GAAP income from continuing operations excludes $27 million of expenses, net of tax, related to stock-based compensation expense, the amortization or impairment of acquisition-related intangibles, interest accretion on our convertible notes' issue costs and fair value adjustments, executive severance and expenses relating to the disposition. The GAAP and non-GAAP targets do not include any estimated change in the fair value of Cree's Lextar investment. The Company also expects to incur a GAAP impairment charge on the Cree Lighting intangible assets, which charge will be reflected in discontinued operations when Cree reports its third quarter results.

The Company will provide a complete review of Q3 results and FY19 Q4 outlook on its regularly scheduled financial results call on May 1 at 5:00 p.m. EDT.

Conference Call:

The Company has held a conference call on Monday, March 18, 2019 at 8:30 a.m. EDT to discuss the transaction and the FY19 Q3 business update. The conference call is available to the public via the internet. For webcast details, visit Cree's website at investor.cree.com/events.cfm

About Cree, Inc:

Cree is an innovator of Wolfspeed® power and radio frequency (RF) semiconductors, lighting class LEDs and lighting products. Cree's Wolfspeed product families include silicon carbide materials, power-switching devices and RF devices targeted for applications such as electric vehicles, fast charging, inverters, power supplies, telecom and military and aerospace. Cree's LED product families include blue and green LED chips, high-brightness LEDs and lighting-class power LEDs targeted for indoor and outdoor lighting, video displays, transportation and specialty lighting applications. Cree's LED lighting systems and lamps serve indoor and outdoor applications.
For additional product and Company information, please refer to www.cree.com

FEATURED

Precise Measurement of UV Light Sources for Disinfection

Precise Measurement of UV Light Sources for Disinfection UV radiation encompasses a very wide wavelength spectrum between 10 and 400 nm and is subdivided in ISO Standard 21348 into three ranges. The UVC range between 100 and 280nm is currently extremely relevant for air and water disinfection for combating COVID-19. Since the outbreak of the pandemic ... Read more »

EDITORIAL

Signify: New EU Ecodesign and Energy Labeling Regulations Are Met

Signify: New EU Ecodesign and Energy Labeling Regulations Are Met Signify (Euronext: LIGHT), confirms that its leading lighting portfolio will meet the new EU Ecodesign and Energy labeling regulations, which will affect all lighting products in the EU Member States from September 2021 onwards. The new regulations are representative of the enormous transition that ... Read more »

EDITORIAL

New DLC Report: Interoperability for Networked Lighting Controls

New DLC Report: Interoperability for Networked Lighting Controls Interoperability for Networked Lighting Controls explores the current interest in networked lighting controls (NLC) and the benefits various stakeholders can attain from championing interoperable systems. The report details three specific and actionable use cases and explains why interoperability ... Read more »

EDITORIAL

Measuring Uniformity of LED Luminaires in Seconds: MKS Announces Ophir® FluxGage™ 604 Measurement System

Measuring Uniformity of LED Luminaires in Seconds: MKS Announces Ophir® FluxGage™ 604 Measurement System MKS Instruments, Inc. (NASDAQ: MKSI) has announced the Ophir® FluxGage™ 604 compact measurement system for LED luminaires. This new series features four additional color sensors evenly arranged in the bottom of the device delivering further x,y, and CCT data as well as the illuminance. Within ... Read more »

EDITORIAL

CIE Position Statement on the Use of UV Radiation to Manage the Risk of COVID-19 Transmission

CIE Position Statement on the Use of UV Radiation to Manage the Risk of COVID-19 Transmission The coronavirus disease (COVID-19) pandemic has accelerated the search for environmental controls to contain or mitigate the spread of the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) responsible for the disease. SARS-CoV-2 is usually transmitted from person to person by contact ... Read more »

EDITORIAL

Tech-Talks BREGENZ - Prof. Ruairí O'Brien, Founder of Ruairí O'Brien Lighting Design

Tech-Talks BREGENZ - Prof. Ruairí O'Brien, Founder of Ruairí O'Brien Lighting Design Ruairí O'Brien, associate professor and head of the Architecture and Visual design department at the German University in Cairo and CEO of Ruairí O'Brien. Architektur. Licht Raumkunst, surprised and delighted the audience with his lecture at LpS 2016 when he talked about allowing darkness. He ... Read more »

EDITORIAL

See and Be Seen: New LED from Osram Ensures Optimal Visibility in Dense Fog

See and Be Seen: New LED from Osram Ensures Optimal Visibility in Dense Fog Dense fog and poor visibility repeatedly lead to serious rear-end collisions. In poor weather conditions, good visibility through a bright rear fog light is very important. The Synios P2720 CR from Osram provides many benefits to manufacturers of rear combination lamps, such as enabling compact ... Read more »