LED lighting company Cree has aborted its long-held plan to spin off its power and radio frequency subsidiary Wolfspeed into a separate publicly traded company, opting instead to sell the business for $850 million in cash.
The definitive agreement to sell the subsidiary to Infineon Technologies, Europe’s largest semiconductor company, was unveiled Thursday before the U.S. markets opened. The sale also includes silicon carbide wafer manufacturing operations related to the Wolfspeed business.
Investors gave the deal a big thumbs up. Cree shares closed Thursday at $27.74, up 11 percent.
Cree CEO Chuck Swoboda said at a press conference at the company’s Durham headquarters that the proceeds of the sale will be invested “to accelerate growth in our core lighting business.”
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“At the same time,” he added, “Wolfspeed should now be able to more aggressively commercialize its unique technologies and unlock their full potential” as part of Infineon.
Germany-based Infineon, which generated $6.4 billion in its latest fiscal year, has 35,400 employees worldwide. Its U.S. workforce includes about 2,500 employees, including about 30 in Morrisville.
Infineon CEO Reinhard Ploss said that purchasing Wolfspeed would enable it to strengthen its own power and RF business in high-growth markets such as electric cars and the Internet of Things.
Wolfspeed posted $173 million in revenue for the 12 months that ended March 27. The subsidiary posted $29 million in revenue in the latest quarter, down 6 percent from a year ago, and accounted for 8 percent of Cree’s total revenue.
Wolfspeed’s power components are used in computer servers, uninterruptible power supplies and for solar energy. Its RF transistors and integrated circuits are used in radar and telecommunications systems.
Infineon is by far the largest power component company in the world and ranks third in RF transistors, Ploss said.
All of Wolfspeed’s 550 employees will be offered jobs by Infineon.
“The story of the acquisition is ... a growth story, not a consolidation or restructuring story,” Ploss said. He also noted that Infineon expects its local workforce to expand “as the market grows and we continue to grow our (market) share.
Wolfspeed is led by Frank Plastina, the former president and CEO of telecommunications company Tekelec and a well-known figure in the Triangle business community. Plastina said he is committed to remain with the business for at least a year after the deal closes to help with the “transition and the strategy execution.”
It’s unclear, however, precisely what his job title and role will be at Infineon.
“It will take over the next months to work through a lot of the transition details,” Swoboda said.
The Wolfspeed brand, which Cree created last year when its renamed its power and RF division, won’t survive the transition.
“Customers might be confused if we came along with two brands,” Ploss said.
The Wolfspeed business being absorbed by Infineon will remain at its current location on a 55-acre site on Cornwallis Road in Research Triangle Park when the purchase is completed, which is expected by the end of the year. The manufacturing operation that Infineon is taking over will be shifted to a building currently occupied by Cree at its campus off of Chin Page Road in Durham.
Cree unveiled plans to spin off the Wolfspeed business into a separate publicly traded company in May 2015, to focus on its core LED lighting business. Under that plan, Cree would have retained majority ownership of Wolfspeed, but the announcement triggered approaches from several potential buyers, Swoboda said.
Cree’s chief financial officer, Michael McDevitt, disclosed on a conference call Thursday that the company’s fiscal fourth quarter revenue will be “at the upper end” of its $388 million target.