Sivers IMA Holding AB of Kista, north of Stockholm in Sweden (a fabless supplier and developer of microwave and millimeter-wave components for WiGig/5G wireless and radio-frequency network applications) has entered into an agreement to acquire Compound Semiconductor Technologies Global Ltd (CST Global) of Hamilton (near Glasgow), Scotland, UK, a privately held company that designs and makes lasers and other semiconductor-based optical products.
CST Global was formed in 1999 by the universities of Strathclyde and Glasgow (together with Scottish Enterprise), specializing in the design, development and manufacture of III-V optoelectronic wafers and chips for the telecom, fiber, industry, defense and health sectors.
With the acquisition of CST Global, Sivers IMA’s portfolio gains direct fiber-optic network products, including lasers used in data-center, cloud and ‘fibre-to-the-subscriber’ markets.
“Data usage and bandwidth needs are constantly increasing and, with this acquisition, Sivers IMA is now able to offer basic components in these growth areas,” says Sivers IMA’s CEO Anders Storm.
“Sivers IMA can now supply photonic, microwave and millimeter wave solutions for the rapidly expanding data-center, cloud and telecommunications markets in China, Europe and America,” comments CST Global’s CEO Neil Martin.
Sivers IMA intends to continue growing CST Global’s product portfolio and customer base. In addition to XPON/GPON products focused on broadband, over the last year CST Global has developed datacoms products based on 100Gbps optical lasers, for the data-center and the metro haul markets.
The acquisition is “an important part of our strategic plan to establish Sivers IMA as a leading global electronics component supplier within data and telecommunications,” says Sivers IMA’s chairman Björn Norrbom. “This is the first step in a larger plan in which we initially intend to apply for listing at Nasdaq First North, with the objective in the next step to transfer to the Nasdaq Stockholm main list,” he adds.
“CST Global is delighted to be part of a growing company group focusing on microelectronics, microwaves and photonics,” comments Martin. “This combination will give us a unique position on a rapidly growing and evolving market, in particular for data- and telecoms.”
The purchase price consists of 27,924,998 newly issued shares in Sivers IMA to be delivered at closing. In addition, if CST Global’s 2017 revenue exceeds £6.5m, an earn-out payment of up to 13,962,499 new shares will be issued (making 41,887,497 shares in total, corresponding to 50% of all shares in the company after the transaction). The volume-weighted average price per share of Sivers IMA during the last ten trading days prior to the agreement was SEK5.40, so the initial purchase price will amount to about SEK151m.
The acquisition is contingent on approval by more than half of the votes casted at Sivers IMA’s extraordinary general meeting (EGM) and the authorization for the board to issue the new shares constituting the initial purchase price, that all shareholders loans to CST Global have been converted into shares, that certain undertakings regarding a 12 month lock-up period for the shares received in Sivers IMA have been given, that certain approvals from third parties has been obtained and that the CST Global’s cash available will be at least £400,000.
For fiscal 2016 (to end-June 2016), CST Global generated revenues of about SEK40m, with a negative EBIT of about SEK8m. As a division within the Sivers IMA group, CST Global is expected to achieve a positive EBIT for full-year 2017. Preliminary revenues for first-quarter 2017 show year-on-year growth of 47% for CST Global, and 45% for Sivers IMA (albeit at negative EBIT).
Even if it is not yet profitable, the strong growth is a contributing factor to the additional need for funding, says Sivers IMA. Its board has therefore identified the need to add working capital and capital for investments for the joint entity, to meet an expected increase in demand and to support the goal of achieving profitability. The firm therefore intends to conduct a rights issue of about SEK80m as soon as possible after the transaction is completed.