IQE Regulatory News (IQE)

22 Dec 2006 07:38

IQE PLC22 December 2006 22 December 2006 IQE plc IQE secures position as leading supplier of advanced wafers to the globalwireless industry with £7.5m acquisition in Singapore IQE plc ('IQE', 'the Group', AIM: IQE), the UK-based leading outsource supplierof advanced wafers and outsource wafer services to the global semiconductorindustry, has agreed to acquire MBE Technology Pte Ltd ("MBE"), a Singaporebased manufacturer of compound epitaxial ('epi') wafers for a total cashconsideration of S$23 million (£7.5 million). This acquisition will be immediately earnings enhancing and completes theGroup's strategy to become the largest supplier of epi-wafers into chipmanufacturers for the global wireless industry. The enlarged Group will have the industry's broadest range of current and nextgeneration products, together with enhanced purchasing power for raw materials.The addition of MBE to the Group will also provide significant opportunities toaccelerate IQE's sales into existing and new customers in the major markets ofthe Pacific Rim region. The Group has also published separately a trading update for the year to 31December 2006. Consideration and funding The consideration is based on an initial payment of S$11.5 million (£3.8million) in cash and a further S$11.5 million (£3.8 million) by the issue to thevendor of loan notes bearing interest of 6.5%. The loan notes are repayable inthree instalments in January 2008, June 2008 and January 2009. Noble & Company Limited has placed 25 million new ordinary IQE shares ('NewOrdinary Shares') at 18p per share to raise approximately £4.5 million (beforeexpenses) to finance the cash consideration payable on completion of theacquisition and working capital (the 'Placing'). The New Ordinary Shares willbe admitted to trading on AIM on 27 December 2006. MBE Technology MBE, incorporated in Singapore 1993, is one of the leading independent globalmanufacturers of compound semiconductor epi-wafers for use in very high-speedelectronic components in the wireless and optical telecommunications industries. It has state-of-the-art facilities in Singapore and a strong team ofmanagement and employees. In 2006, MBE is expected to generate revenues in the order of US$15 million andan EBITDA of over US$ 3.2 million. MBE's growth and premier position are sustained by its strong customer baseacross the Far East including a strategic supplier agreement with a substantialJapanese electronics manufacturer. Acquisition Rationale The acquisition positions IQE as the largest outsource supplier worldwide of epiwafers to the global wireless industry. It will provide IQE with a very strongpresence in Asia including excellent links into Japan, Taiwan, China and Korea.IQE intends to use the new base in Asia to aggressively sell into the PacificRim wireless industry. IQE will now have a dual-source manufacturing capability for all its wirelessproducts with facilities in Singapore, the US, and the UK qualified for theproduction of wafers for RF components. The Board believe this will enable theGroup to offer its customers effectively risk free sourcing of wafers. The acquisition is expected to increase the Group's purchasing power of rawmaterials and the utilisation of IQE's other facilities as demand, particularlyfrom the Pacific Rim countries, continues to grow. Industry background The wireless industry continues to grow extremely rapidly driven by increasingmobile handset sales and the addition of WiFi, WiMAX and wireless media.Consumers are demanding increased functionality, with faster access, any time,anywhere and more comprehensive interactive content. This is creating a hugedemand for faster, more sophisticated handsets. These higher data rate and more sophisticated handsets and wireless systemsrequire much more use of Gallium Arsenide wafers, IQE's leading productoffering. According to Strategic Analytics, the amount of Gallium Arsenidewafers used in mobile phones alone is expected to at least double between 2005and 2009. Dr Drew Nelson, IQE Chief Executive, said: "The earning enhancing acquisition of MBE, with its strong product and customerbase, coupled with its very powerful regional presence provides IQE with clearglobal leadership in the supply of advanced wafer products to the worldwidewireless industry. "Following the acquisition of EMD in August, we have now completed our strategyof becoming the leading supplier of wafers to the global wireless industry,providing all the required wafer technologies. "MBE provides us with a Far East base for the aggressive penetration of themajor markets of the Pacific Rim, particularly Japan, China, Taiwan and Korea.It also means that the Group now has a second source for the manufacture of allwafer products for the wireless industry. This brings significant manufacturingsynergies, allowing us to more fully leverage our global purchasing power andexcess manufacturing capacity at our facilities in the US. "IQE is the only wafer company capable of supplying products for the fullspectrum of the wireless market, from handset to infrastructure. We can provideour customers with complete assurance of supply and a one stop shop for all oftheir wafer requirements - we are uniquely well positioned to play a leadingrole the rapid growth of the global wireless market." Enquiries: IQE plc www.iqep.com. Dr Drew Nelson, Chief Executive Stuart Hall, Chief Finance Officer Chris Meadows, Investor Relations Noble & Company Limited +44(0) 20 7763 2200 John Llewellyn-Lloyd/ Sam Reynolds College Hill Adrian Duffield/Ben Way +44 (0) 20 7457 2020 Placing Details IQE has conditionally raised approximately £4.5 million (before expenses)through a placing of 25,000,000 new ordinary shares at 18p per share. The Placing is conditional, inter alia, on admission (''Admission'') of the NewOrdinary Shares to trading on AIM, a market operated by London Stock Exchangeplc (the ''London Stock Exchange'') ('AIM') (which is the market on which theCompany's existing issued ordinary shares are admitted to trading) occurring byno later than 27 December 2006. The New Ordinary Shares are equivalent toapproximately 6 per cent. of the Company's enlarged ordinary share capitalfollowing Admission and the Placing Price represents a discount of approximately4 per cent. to the closing mid-market price of an existing issued ordinary shareof 18.75p on 21 December 2006, the latest practicable date prior to the postingof this announcement. Application has been made for the admission of the New Ordinary Shares totrading on AIM. The shares will rank pari passu with the existing ordinaryshares of the Company. Dealings in the New Ordinary Shares are expected tocommence on 27 December 2006. Note to Editors IQE is the leading global outsource supplier of advanced semiconductor wafers,with products that cover the whole spectrum of wafer structures, supported by aninnovative outsourced foundry services portfolio that allows the Group toprovide a "one stop shop" for the wafer needs of the world's leadingsemiconductor manufacturers IQE uses advanced crystal growth technology (epitaxy) to manufacture and supplybespoke semiconductor wafers ("epi-wafers") to the major chip manufacturingcompanies, who then use these wafers to make the chips which form the keycomponents of virtually all high technology systems. IQE is unique in beingable to supply wafers using all of the leading crystal growth technologyplatforms. IQE's products are found in many leading edge consumer, communication, computingand industrial applications, including a complete range of wafer products forthe wireless industry, including mobile handsets and wireless infrastructure,WiFi, WiMAX, base stations, GPS, and satellite communications; opticalcommunications, optical storage (CD, DVD), laser optical mouse, laser printers &photocopiers, thermal imagers, leading edge medical products, barcode, highefficiency LEDs and a variety of advanced silicon based systems. These manufacturers are increasingly seeking to outsource wafer production tospecialist foundries such as IQE, in order to reduce overall wafer costs andaccelerate time to market. IQE provides bespoke R&D services to deliver customised materials for specificapplications and offers specialist technical staff to manufacture tospecification either at its own facilities or on the customer's own sites. TheGroup is also able to leverage its global purchasing volumes to reduce the costof raw materials. In this way IQE's outsourced services, provide compellingbenefits in terms of flexibility and predictability of cost, therebysignificantly reducing operating risk. Following the acquisition, IQE will employ around 320 people and operate sixmanufacturing facilities located in Cardiff (two) and Milton Keynes in the UK,and in Bethlehem, Pennsylvania and Somerset, New Jersey in the USA, andSingapore. The Group also has nine sales offices located in major economiccentres worldwide. Glossary Epiwafer: A wafer of semiconducting material (made by a crystal growth processcalled epitaxy) for use in the manufacture of microelectronic devices. Twomethods of growing the epitaxial layer on existing silicon or other wafers arecurrently used: metal organic chemical vapour deposition (MOCVD) and molecularbeam epitaxy (MBE). These wafers are typically newer types of semiconductorscomprising some combination of the elements gallium, indium, aluminum, nitrogen,phosphorus or arsenic. Semiconductor: A solid whose electrical conductivity can be controlled over awide range, either permanently by introducing impurities ("doping") ordynamically by applying electric fields. Semiconductor devices with dynamicallycontrolled conductivity are the building blocks of integrated circuits, such asmicroprocessors. Semiconductors may be elemental materials such as silicon andgermanium, or compound semiconductors which comprise more than one element suchas gallium arsenide or alloys such as silicon germanium or aluminium galliumarsenide. Wafer: a thin slice of semiconducting material upon which microcircuits areconstructed. Wafers are thus of key importance in the fabrication ofsemiconductor devices such as integrated circuits. Typically they are made invarious sizes ranging from 1 inch (25.4 mm) to 11.8 inches (300 mm), andthicknesses of the approximately 0.5 mm. RF: Radio Frequency components such as amplifiers, receivers and modulators,which are designed to operate in the microwave and wireless ranges of theelectromagnetic spectrum. This information is provided by RNS The company news service from the London Stock Exchange