IQE to buy epi supplier, sales up 30 percent - Embedded.com

IQE to buy epi supplier, sales up 30 percent

LONDON — IQE plc is to buy the Electronic Materials Division (EMD), the U.S. epi foundry business from Emcore Corp. for $16 million.

IQE was formed in May 1999 by the merger of two wafer foundries with facilities in Cardiff, Wales and Bethlehem, Pennsylvania. EMD's total revenue For the financial year ended September 30, 2005, was $12.2 million, EBITDA wand the value of assets was $9.0million.

The acquisition is seen as creating a global outsource supplier of epi wafers to the wireless market, providing opportunities to accelerate sales into existing and new customers.

All of EMD's employees, including its management team, are to be offered employment with IQE and the intention is the EMD business will continue to be run as a stand alone entity in New Jersey.

EMD provides foundry based production of high performance compound semiconductor electronic epitaxial materials, with a focus on the wireless markets. Its has approximately 50 employees, ten advanced epitaxial tools and is one of the top five third-party suppliers of epi wafers in the world.

They have concentrated on HBT based technologies for power amplifier applications, as well as integrated BiFET and GaN structures.

IQE believes the acquisition will position its as the leading global outsource supplier of current and next generation products into the wireless marketplace including PHEMT, HBT, integrated BiFET and advanced GaN technologies.

“This acquisition represents a significant opportunity for IQE to enhance its leading position as the global supplier of customized wafer products and outsource wafer services to the semiconductor industry, and to create significant shareholder value throughthe synergistic benefits obtained through combining the two businesses,” said, Dr Drew Nelson, president & CEO of IQE. “Theaddition of EMD's products, employees and intellectual property will clearly enhance IQE's position as the leading player in the epitaxial foundry industry.”

Scott Massie, CEO of EMCORE added, “EMD has been an innovator in developing state of the art RF materials for over 10 years but as we continue to focus our strategy on broadband infrastructure, solar power and value-added products, it became clear we needed to find a more strategic fit for EMD's products and employees. The sale of this division will lower our cost base, improve gross margins company-wide and permit us to further consolidate operations in New Mexico and California.”

IQE, which trades on the U.K.'s AIM, is raising cash for the purchase by the placing of 87.5 million new ordinary shares of 1p each in the capital of the company at an issue price of 13.75p per share. The New Ordinary Shares will be equivalent to approximately 21.6 per cent. of the company's enlarged ordinary share capital. IQE has also released a trading update which shows that while detailed half year results are still to be finalized, the company's directors expect 2006 H1 revenues to be in the region of �£14.5 million, an increase of �£3.3 million (up 30percent) on H2 2005 and an increase of �£4.8millon (up 50percent) on H1 2005.

All of IQE's four business units have grown during the first half of 2006, particularly the wireless division, IQE Inc, located in the U.S., and IQE Silicon in the UK. Both the optical and substrate businesses have also grown significantly, and are both set to grow even more strongly in the second half.

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