IQE Regulatory News (IQE)

10 Oct 2019 07:00

Acquisition of 100% of CSDC Private Limited (“CSDC”)

IQE plc

(“IQE”, the “Company” or the “Group”)

Acquisition of 100% of CSDC Private Limited (“CSDC”)

Cardiff, UK 10 October 2019: IQE plc (AIM: IQE) the leading supplier of advanced wafer products and material solutions to the semiconductor industry, announces the acquisition of third-party shareholdings in its CSDC joint venture in Singapore taking its ownership to 100%.

CSDC was formed in March 2015 as a joint venture between IQE’s Singaporean subsidiary MBE Technology Pte Limited (51%), WIN Semiconductors Corp (25%), Nanyang Technological University (18%) and individuals of the NanYang University (6%). It was established as a vehicle for the development and commercialisation of compound semiconductor technologies for academic and industrial customers based on Molecular Beam Epitaxy (MBE) technologies in Asia.

Since formation, the geo-political landscape has changed significantly. During 2019 in particular, the localisation of Asian technology supply chains is rapidly becoming evident and significant opportunities are emerging for the China 5G market.

By taking the operation under 100% ownership, IQE is best placed to

Take the necessary steps to restructure the operation which is currently loss-making as a result of under-utilisation of assets and property lease obligations; andPursue Asian market sales opportunities for MBE-based products to return the operation to profitability.

Revenue recognised by IQE and its Singaporean subsidiary will be unaffected by the transaction. It is anticipated that post acquisition adjusted EBITDA and adjusted Operating Profit in the consolidated group accounts for FY19 will be adversely affected by c.£0.5m.

The acquisition is for a nominal fee of USD$1 to WIN Semiconductors Corp and SGD$1 to each of the other third party shareholders, to be settled in cash. The non-cash balance sheet impacts will be finalised as part of the completion of acquisition accounting for the shareholdings.

For the year ended 31 December 2018, CSDC recorded net losses of SGD$8.9m. The net liabilities attributable to CSDC as at 31 December 2018 were SGD$15.4m.

Drew Nelson will remain as a Director of CSDC and LG Yeap, General Manager for MBE Technology Pte Limited, will become a Director of CSDC.

The acquisition constitutes a related party transaction under AIM Rule 13 by virtue of WIN Semiconductors Corp and Nanyang Technological University being substantial shareholders in CSDC hence they are related parties under the AIM Rules.

The directors of the Company, having consulted with Peel Hunt LLP in its capacity as the Company's nominated adviser for the purposes of the AIM Rules, consider the terms of the transaction to be fair and reasonable insofar as the Company's shareholders are concerned. 

Dr Drew Nelson, Chief Executive Officer of IQE, said:

“In the current geopolitical context, Singapore represents a strategically significant site for IQE. The capabilities of the CSDC team and skills availability in that location, coupled with proximity to Asian chip customers and OEMs, provide a strong opportunity to contribute to IQE’s global growth opportunities. With 100% control, IQE will be best positioned to address the current financial position and secure the strategic direction of the operation.”

CONTACTS:

IQE plc+44 (0) 29 2083 9400Drew NelsonTim Pullen Peel Hunt LLP (Nomad and Joint Broker)+44 (0) 20 7418 8900Edward KnightNick Prowting Christopher Golden Citigroup Global Markets Limited (Joint Broker)+44 (0) 20 7986 4000Christopher WrenPeter Catterall

Headland Consultancy (Financial PR) + 44 (0) 20 3805 4822Andy Rivett-Carnac: +44 (0) 79 6899 7365Tom James: +44 (0) 78 1859 4991

ABOUT IQE

http://iqep.com

IQE is the leading global supplier of advanced compound semiconductor wafers that enable a diverse range of applications across:

handset devicesglobal telecoms infrastructureconnected devices3D sensing

The macro trends of 5G and connected devices are expected to drive significant growth for compound semiconductors over the coming years.

As a scaled global epitaxy wafer manufacturer, IQE is uniquely positioned in this market which has high barriers to entry. IQE supplies the whole market and is agnostic to the winners and losers at chip and OEM level. By leveraging the Group’s intellectual property portfolio including know-how and patents, it produces epitaxy wafers of superior quality, yield and unit economics.

IQE is headquartered in Cardiff UK, and Is listed on the AIM stock Exchange in London.