Cohu to acquire Xcerra creating global forerunner in back-end semiconductor equipment

Cohu and Xcerra announced that they have entered into a definitive merger agreement pursuant to which Cohu will acquire Xcerra for a combination of cash and stock. The acquisition is expected to make Cohu a global forerunner in semiconductor test, with combined sales for Cohu and Xcerra in excess of $800 million for the last twelve months – Immediately Accretive Transaction Diversifies Revenue Base and Increases TAM to ~ $5 Billion

Combined last twelve months (“LTM”) reported revenue of approximately $828 million and non-GAAP operating income of approximately $124 million:
• Complementary acquisition expected to create diversified revenue base and expand addressable market to $5 billion
• Increases footprint in high growth end-markets of automotive, IoT, industrial and mobility
• Estimated to deliver over $20 million in annual run-rate cost synergies within 2 years
• Expected to be immediately accretive to non-GAAP earnings per share after closing

Upon the closing of the transaction, Xcerra shareholders will be entitled to receive $9.00 in cash and 0.2109 of a share of Cohu common stock, subject to the terms of the definitive agreement. Based on the closing price of Cohu common stock, the transaction values Xcerra at $13.92 per share, or approximately $796 million in equity value, with a total enterprise value of approximately $627 million, after excluding Xcerra’s cash and marketable securities net of the debt on its balance sheet. The transaction value represents a premium of 8.4% to Xcerra’s closing price, and a premium of 15.4% to Xcerra’s 30-day average closing price.

This proposed acquisition is a powerful combination of two complementary firms that will accelerate our strategy to diversify our product offerings and strengthen Cohu’s position as a global leader in back-end semiconductor equipment. The depth and breadth of the combined product portfolios, engineering and product development resources, as well as the global customer support platforms will enable us to deliver comprehensive semiconductor back-end solutions that better meet the future needs of our customers,” commented Luis Müller, Cohu’s President and CEO.

Mr. Müller continued, “The acquisition of Xcerra increases our addressable market to approximately $5 billion across handlers, contactors, test and inspection, further strengthening our ability to fully capitalize on the secular growth opportunities in the automotive, IoT, industrial and mobility markets. We are excited to welcome the Xcerra team to Cohu and look forward to an efficient completion of the transaction, with a focus on delivering long-term value to our customers, employees and shareholders.

Commenting on the proposed acquisition, David Tacelli, Xcerra’s President and CEO, stated, “We are very pleased to be joining forces with Cohu to create a global leader in back-end semiconductor test. Together, we will be an even stronger and more competitive firm with far reaching long-term benefits to our customers and employees. I am extremely proud of what the Xcerra team has accomplished over the past several years and look forward to the exciting possibilities we can achieve together with Cohu.

The transaction is expected to be immediately accretive to non-GAAP earnings per share and generate over $20 million of annual run-rate cost synergies within 2 years of closing, excluding stock-based compensation and other charges.

Transaction details:
Cohu intends to fund the cash payable to Xcerra shareholders with a combination of cash on hand from the combined firms’ balance sheets and approximately $350 million in debt financing. The transaction is expected to close in the second half of calendar year 2018, subject to approval by both firms’ respective shareholders, antitrust regulatory approvals and other customary closing conditions.

Xcerra shareholders are expected to own approximately 30% of the combined firm upon the closing of the transaction. The transaction has been unanimously approved by the Boards of Directors of both firms.

Management and board of directors:
Luis Müller will remain president and chief executive officer and lead the combined firm, and Jeff Jones will continue to serve as vice president of finance and chief financial officer. Two members of Xcerra’s board of directors will join Cohu’s board upon the closing of the transaction.

Deutsche Bank Securities served as the exclusive financial advisor to Cohu and Cleary Gottlieb Steen & Hamilton LLP served as Cohu’s legal advisor. Cowen served as exclusive financial advisor to Xcerra and Latham & Watkins LLP served as Xcerra’s legal advisor.