7 July 2014

Orbotech to acquire SPTS for $370m

Orbotech Ltd of Yavne, Israel (which makes production equipment for manufacturers of printed circuit boards, flat-panel displays and other electronic components) has signed a definitive share purchase agreement to acquire plasma etch, deposition and thermal wafer processing equipment maker SPTS Technologies Group Ltd of Newport, Wales, UK from European private equity firm Bridgepoint and others for about $370m in cash (including repayment or assumption of debt).

SPTS offers plasma etch, physical vapor deposition (PVD), chemical vapor deposition (CVD) and thermal wafer processing solutions for the advanced packaging, micro-electro-mechanical systems (MEMS), LED, high-speed RF on GaAs, and power management device markets. The firm has manufacturing facilities in Allentown, PA and San Jose, CA, USA, as well as in Newport. Through the acquisition, Orbotech expects to accelerate the execution of its growth and diversification strategy, and is moving up the electronics value chain. The firm expects that, by building on SPTS’ technological and commercial position, it will be able to offer solutions for a broad range of demanding micro manufacturing applications. Also, the combination should expand Orbotech’s presence in Europe and North America and provide SPTS with greater reach in the Pacific region, particularly China.

“Orbotech identified advanced packaging as a strategic and natural extension of its business into an adjacent high-growth market,” says Orbotech’s CEO Asher Levy. “SPTS benefits from established, long-standing partnerships with major industry players. It is a well-known and highly respected brand with deep domain expertise in those segments in which it operates. Acquiring SPTS allows us to accelerate the expansion into advanced packaging, with multiple manufacturing solutions ideally suited for this growing segment,” he adds. “By combining the extensive know-how and core assets of both companies we will continue to enhance Orbotech’s portfolio and industry leadership while focusing our efforts on driving profitable growth,” Levy concludes.

“Together, we will be a powerhouse of expertise in micro manufacturing, providing a broad solution set of mission-critical capabilities to serve designers and manufacturers across the dynamic electronics industry landscape,” reckons SPTS’ president & chief operating officer Kevin Crofton. “We are excited about the opportunity to leverage Orbotech’s strong presence in the Pacific as well as its products and technologies,” he adds.

“Clear market leadership of high-growth niches as well as the application of its technology to emerging niches in the microchip industry have made SPTS strategically attractive,” comments Christopher Bell, a partner at Bridgepoint. “With its new shareholder, the business will be well positioned to combine expertise in micro manufacturing to advance further.”

The acquisition and related costs are expected to be financed through a combination of cash on hand and about $300m in debt financing under a new term loan facility. The acquisition and financing are expected to close during of third-quarter 2014, each subject to certain closing conditions.

In 2014, under UK GAAP and on a standalone basis for the full year, SPTS is expected to generate revenue of about $180m, gross margin of 48%, and (earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 25% of its revenue. The acquisition of SPTS is expected to be accretive to Orbotech’s non-GAAP earnings immediately after closing and GAAP accretive in 2015. After closing, SPTS’ financial statements will be converted to US GAAP to be consistent with Orbotech’s financial statements.

Based on Orbotech’s and SPTS’s financial condition as of end-March, Orbotech estimates that, post closing, it will have about $100m of cash and cash equivalents on an adjusted basis.

Tags:  SPTS

Visit: www.spts.com

Visit: www.orbotech.com