CREE, INC. (NASDAQ:CREE) Files An 8-K Entry into a Material Definitive Agreement
Entry into a Material Definitive Agreement
On March 14, 2019, Cree, Inc. (“Cree” or the “Company”) entered into a Purchase Agreement (the “Purchase Agreement”) with IDEAL Industries, Inc., a Delaware corporation (“IDEAL” or the “Buyer”). The transaction, which was approved by both Cree’s Board of Directors and IDEAL’s Board of Directors, is expected to close by the end of Cree’s fiscal year 2019, subject to customary closing conditions and governmental approvals.
to the Purchase Agreement, the Company will sell to the Buyer, and the Buyer will (i) purchase from the Company, (a) certain manufacturing facilities and equipment, inventory, intellectual property rights, contracts, and real estate of the Company comprising the Company’s Lighting Products business unit, which includes the LED lighting fixtures, lamps and corporate lighting solutions business for commercial, industrial and consumer applications, and (b) all of the issued and outstanding equity interests of E-conolight LLC (“E-conolight”), Cree Canada Corp. and Cree Europe S.r.l, each a wholly owned subsidiary of the Company (collectively, the “Lighting Products Business”); and (ii) assume certain liabilities related to the Lighting Products Business (collectively (i) and (ii), the “Transaction”). The Company will retain certain liabilities associated with the Lighting Products Business arising prior to the closing of the Transaction. IDEAL is expected to hire most of Cree’s approximately 1300 employees of the Lighting Products Business either at the closing of the Transaction or following a transition period.
The purchase price for the Lighting Products Business will be $225 million in cash, which is subject to certain adjustments, plus the potential to receive an earn-out payment based on an adjusted EBITDA metric for the Lighting Products Business over a 12-month period beginning two years after the Transaction closes. In connection with the Transaction, the Company and the Buyer will also enter into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which will assign to the Buyer certain intellectual property owned by the Company and license to the Buyer certain additional intellectual property owned by the Company; (ii) a Transition Services Agreement, which is designed to ensure a smooth transition of the Lighting Products Business to the Buyer; (iii) an LED Supply Agreement, to which the Company will supply the Buyer with certain LED chip and component products for three years; and (iv) a Real Estate License Agreement, which will allow the Buyer to use certain premises owned by the Company to conduct the Lighting Products Business after closing.
The Purchase Agreement contains customary representations, warranties and covenants, including covenants to cooperate in seeking regulatory approvals and to indemnify the Buyer for certain damages that the Buyer may suffer following the closing of the Transaction.
The obligation of the Buyer to purchase the Lighting Products Business is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, including regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and certain similar non-US regulations, and other customary closing conditions. The Purchase Agreement provides for customary termination rights of the parties.
Credit Agreement Consent
Also on March 14, 2019, the Company entered into a Consent (the “Consent”) under the Third Amendment to its Credit Agreement, dated as of January 9, 2015 (as amended from time to time, the “Credit Agreement”), with Wells Fargo Bank, National Association, as administrative agent, E-conolight, as guarantor, and the other lenders party thereto. The Consent permits the Company to consummate the
Transaction and, in addition, to the Consent, the lenders have agreed to release the liens on the assets of the Lighting Products Business and the guaranty of E-conolight at the time of the closing of the Transaction.
Regulation FD Disclosure
On March 15, 2019, the Company issued a press release announcing the execution of the Purchase Agreement. The press release is furnished as Exhibit 99.1 and incorporated by reference into Item 7.01 of this report.
The information in this Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Furthermore, the information in Item 7.01 of this report shall not be deemed incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.
Financial Statements and Exhibits
Description of Exhibit
Press release dated March 15, 2019
Cautionary Statements Regarding Forward Looking Statements
This report contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause Cree’s actual results to differ materially from those indicated in the forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the anticipated benefits of the transaction, including future financial and operating results. Actual results, including with respect to Cree’s ability to complete the transaction on time or at all, could differ materially due to a number of factors, including risks associated with divestiture transactions generally, including the inability to obtain, or delays in obtaining, required regulatory approvals; issues,delays or complications in completing required carve-out activities to allow the Lighting Products Business to operate on a stand-alone basis after the closing, including incurring unanticipated costs to complete such activities; the ability of the Lighting Products Business to generate adjusted EBITDA in the third year post-closing sufficient to result in payment of an earn-out consistent with Cree’s expectations, or any earn-out payment; risks associated with integration or transition of the operations, systems and personnel of the Lighting Products Business, each, as applicable, within the term of the post-closing transition services agreement between the Buyer and the Company; unfavorable reaction to the sale by customers, competitors, suppliers and employees; the risk that costs associated with the transaction will be greater than Cree expects; as well as other factors discussed in Cree’s filings with the Securities and Exchange Commission (SEC), including its report on Form 10-K for the fiscal year ended June 24, 2018, and subsequent reports filed with the SEC. These forward-looking statements represent Cree’s judgment as of the date of this report. Any forward-looking statements included in this report are as of the date made and the Company does not intend to update them if its views later change. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this report.
CREE INC Exhibit
EX-99.1 2 exhibit991_031519.htm EXHIBIT 99.1 Exhibit Exhibit 99.1FOR IMMEDIATE RELEASE Press Release Cree to Sell Lighting Business to IDEAL INDUSTRIES,…
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About CREE, INC. (NASDAQ:CREE)
Cree, Inc. is a manufacturer of lighting-class light emitting diode (LED) products, lighting products and semiconductor products for power and radio-frequency (RF) applications. The Company’s products are focused for applications, such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, inverters and wireless systems. The Company has three segments: Lighting Products, LED Products, and Power and RF Products. The Company’s Lighting Products segment offers LED lighting systems and bulbs. The Company’s LED Products segment offers LED components, LED chips and silicon carbide (SiC) materials. The Company’s Power and RF Products segment offers power devices and RF devices. The Company designs, manufactures and markets lighting systems for indoor and outdoor applications, with a focus on LED lighting systems for the commercial, industrial and consumer markets.