Advanced Energy Industries, Inc. (Nasdaq: AEIS), a global
leader in highly engineered, precision power conversion,
measurement and control solutions,
today announced that it has entered into a
definitive agreement to acquire the Embedded Power business
of Artesyn Embedded Technologies, Inc. (Artesyn EP) from
Platinum Equity. The total consideration for this
transaction will be approximately $400 million.
Artesyn EP is one of the world’s
largest providers of highly engineered,
application-specific power supplies for demanding
applications. As a trusted technology partner to original
equipment manufacturers (OEMs), it serves multiple
attractive growth markets, including hyperscale data
centers, telecom infrastructure in next generation 5G
networks, embedded
industrial power applications and medical power for
diagnostic and treatment applications.
“We are excited by this highly strategic
acquisition of Artesyn EP, transforming Advanced
Energy into a highly
diversified, pure-play power house with a global
platform for accelerated earnings growth,” said Yuval Wasserman,
president and CEO of Advanced Energy.
Compelling Strategic Benefits:
-
Creates a premier global power conversion company with enabling
critical power technologies and over $1.3
billion in annual revenue, based on 2018 combined
historical results.
- Triples AE’s addressable market to
$7.5 billion by adding new attractive
growth verticals in hyperscale data center,
5G wireless, industrial
and medical technologies.
- Strong strategic
fit with complementary technologies, product
portfolios and core competencies in highly engineered,
application-specific power solutions for key OEMs in demanding
applications.
- Broadens and diversifies Advanced Energy
into multiple, stable growth verticals and
customers.
- Accelerates earnings growth with over $20
million of expected annualized synergies, driving
projected earnings accretion of over $0.80 per share in 18-24
months and targeting to reach long-term accretion of over $1.50 per
share, on a non-GAAP basis.
- Creates significant financial value with
a purchase price of approximately 5x
synergy-adjusted EBITDA, with a path to future margin
expansion, additional cost savings and
de-levering to create long-term shareholder
value.
“Artesyn EP fits perfectly into our
diversification strategy by adding a broad set
of new growth verticals, industry
leading power technologies, deep customer
relationships and a world-class team. AE’s semiconductor
customers will also benefit from the expanded
capabilities, broadened product offerings and
increased stability and scale. With the anticipated
immediate accretion and future synergies of
this acquisition, we are positioning AE for accelerated
profitable and sustainable growth,” added Wasserman.
“We believe our Embedded Power business will substantially
benefit from the combination with Advanced Energy,” said
Jay Geldmacher, CEO of Artesyn Embedded
Technologies. “Together with AE, we form a
consolidated platform with a synergistic and
complementary product portfolio, which expands our industrial
business into semiconductor markets and provides our existing
customers access to new technologies. Our combined core
competencies, innovation and operational infrastructure
can generate profitable growth, creating value for all
stakeholders.”
Terms of Agreements
Under the terms of the Share Purchase Agreement, based on a
total base purchase price of $400 million, Advanced Energy will pay
approximately $364 million in cash and assume approximately $36
million of liabilities for Artesyn EP, subject to final adjustments
to the valuation of such liabilities and adjustments to reflect
working capital as of the closing. AE expects to finance
the transaction through a combination of existing cash and $350
million of debt supported by commitments from its lenders.
The transaction only involves Artesyn’s Embedded Power
business, which includes the
Artesyn and Astec brands. Artesyn’s Embedded
Computing and Consumer Products businesses are
not included in this transaction. Artesyn EP is a
leading global supplier and manufacturer of
highly engineered power conversion products, including AC-DC
power supplies, DC input devices and board mounted DC-DC
modules. The Artesyn and Astec brands are
well-known as two of the world’s leading brands in power conversion
products.
Timing and Approvals
The transaction has been approved by the Board of Directors
of Advanced Energy. The transaction, which is expected to
close during the second half of
2019, is subject to the satisfaction of customary closing
conditions, including receipt of international regulatory
approvals and completion of certain carve out activities
involving Artesyn’s Embedded Computing
and Consumer Products businesses.
Advisors
Advanced Energy is advised in the transaction
by Evercore as exclusive financial advisor
and Foley & Lardner LLP as legal counsel. JP Morgan is
serving as primary financial advisor to Artesyn. Morgan Stanley is
also providing financial advisory services to Artesyn on the
transaction. Morgan, Lewis & Bockius LLP and Baker &
McKenzie LLP are serving as legal counsel to Artesyn. The
transaction will be supported by committed financing led by
Bank of America, HSBC USA, Bank of the West BNP Paribas
and Citibank.
Conference Call and Webcast
Information
Management will host a conference call on Wednesday, May 15,
2019 at 8:00 a.m. Eastern Time. Additional information
regarding the financial performance of Artesyn EP and
forward-looking expectations will be provided during this
call. Domestic callers may access this conference call by
dialing (855) 232-8958. International callers may access the
call by dialing +1 (315) 625-6980. Participants will need to
provide the operator with the Conference ID
Number 5476057, which has been reserved for this call. A
webcast will be available on the company’s Investor Relations web
page at ir.advanced-energy.com.
About Advanced Energy
Advanced Energy (Nasdaq: AEIS) is a global leader in the design
and manufacturing of highly engineered, precision power conversion,
measurement and control solutions for mission-critical applications
and processes. AE’s power solutions enable customer innovation in
complex semiconductor and industrial manufacturing applications.
With engineering know-how and responsive service and support around
the globe, the company builds collaborative partnerships to meet
technology advances, propel growth for its customers and innovate
the future of power. Advanced Energy has devoted more than three
decades to perfecting power for its global customers and is
headquartered in Fort Collins, Colorado, USA. For more information,
visit www.advancedenergy.com.
Advanced Energy | Precision. Power. Performance.
About Artesyn’s Embedded Power
business
Artesyn's Embedded Power business is one of the world's largest
and most successful power supply companies. The company's
extensive standard AC-DC product portfolio covers a power range of
3 watts to 24 kilowatts and includes a wide range of
configurations and customizable solutions. Widely acknowledged as
an industry leader in distributed power applications, Artesyn
produces an exceptionally wide range of DC-DC power conversion
products. Headquartered in Tempe, Arizona, Artesyn’s Embedded
Power business has approximately 9,500 employees across multiple
engineering design centers, manufacturing facilities, and global
sales and support offices worldwide. For more
information, visit www.artesyn.com/power.
For more information, contact:
Brian Smith Advanced Energy
Industries, Inc. +1 (970)
407-6555 ir@aei.com |
|
Non-GAAP and Adjusted
Financial Measures
Advanced Energy’s non-GAAP measures exclude the impact of
non-cash related charges such as stock-based compensation and
amortization of intangible assets, as well as discontinued
operations, minority interest, and non-recurring items such as
acquisition-related costs and restructuring expenses. The non-GAAP
measures are not in accordance with, or an alternative for, similar
measures calculated under generally accepted accounting principles
and may be different from non-GAAP measures used by other
companies. In addition, these non-GAAP measures are not based on
any comprehensive set of accounting rules or principles. Advanced
Energy believes that these non-GAAP measures provide useful
information to management and investors to evaluate business
performance without the impacts of certain non-cash charges and
other charges which are not part of the company’s usual operations.
The company uses these non-GAAP measures to assess performance
against business objectives, make business decisions, develop
budgets, forecast future periods, assess trends and evaluate
financial impacts of various scenarios. In addition, management's
incentive plans include these non-GAAP measures as criteria for
achievements. Additionally, the company believes that these
non-GAAP measures, in combination with its financial
results calculated in accordance with GAAP, provide investors
with additional perspective. While some of the excluded items may
be incurred and reflected in the company’s GAAP financial results
in the foreseeable future, the company believes that the items
excluded from certain non-GAAP measures do not accurately reflect
the underlying performance of its continuing operations for the
period in which they are incurred. The use of non-GAAP measures has
limitations in that such measures do not reflect all of the amounts
associated with the company’s results of operations as determined
in accordance with GAAP, and these measures should only be used to
evaluate the company’s results of operations in conjunction with
the corresponding GAAP measures. Please refer to the Form 8-K
regarding this release furnished today to the Securities and
Exchange Commission.
Artesyn EP’s adjusted financial measures,
including Adjusted
EBITDA, Adjusted Operating Income and Adjusted
Operating Margins, exclude the impact
of non-cash related charges such as amortization of
intangible assets, as well as restructuring expenses, one-time
optimization and integration expenses, other income and deductions,
management fees to private equity owners of Artesyn, and other
non-cash charges. Advanced Energy and
Artesyn believe that Artesyn
EP's adjusted financial measures are relevant
and useful information for the companies and investors to
evaluate Artesyn EP’s past performance and enterprise value,
without the impacts of certain non-cash charges and other charges
which are not part of the company’s usual operations. Expected
synergies and projected earnings accretion stated
above are projections based on combination
of Advanced Energy’s non-GAAP financial measures and Artesyn
EP’s adjusted financial measures. Neither Advanced Energy nor
Artesyn has begun a reconciliation of Artesyn EP’s adjusted
financial measures to Advanced Energy’s non-GAAP
measures, and therefore cannot quantify the differences, which may
be material. In addition, Advanced Energy will account for the
acquisition under the purchase method of accounting, which could
result in a new valuation for the assets and liabilities of
Artesyn EP. Advanced Energy will not be preparing
any pro forma information for the acquisition and financing until
the reconciliation and valuation estimates have been
prepared.
Forward-looking Language
Statements in this press release regarding the proposed
transaction between Advanced Energy, Artesyn Embedded Technologies,
Inc. (“Artesyn”) and its owners , the expected timetable for
completing the transaction, future financial and operating results,
benefits and synergies of the transaction, future opportunities for
the combined company and any other statements about Advanced
Energy’s or Artesyn’s managements' future expectations, beliefs,
goals, plans, aspirations or prospects constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any statements that are not statements of
historical fact (including statements containing the words "will,"
"projects," "intends," "believes," "plans," "anticipates,"
"expects," "estimates," "forecasts," "continues" and similar
expressions) should also be considered to be forward-looking
statements. There are a number of important factors that could
cause actual results or events to differ materially from those
indicated by such forward-looking statements, including: (1) the
ability to consummate the transaction; (2) the ability of the
owners of Artesyn to successfully complete the business division
reorganization whereby Artesyn’s Embedded Computing
and Consumer businesses would be divested into two new
separate companies; (3) risks that the conditions to the closing of
the transaction are not satisfied, including the risk that required
approvals for the transaction from governmental authorities are not
obtained; (4) litigation relating to the transaction; (5) the
ability of Advanced Energy to successfully integrate Artesyn's
operations and employees; (6) the risks that the transition
services and interim contract manufacturing arrangements among the
parties operate as planned; (7) unexpected costs, charges or
expenses resulting from the transaction; (8) risks that the
proposed transaction disrupts the current plans and operations of
Advanced Energy and Artesyn; (9) the ability to realize the
projected revenue, addressable market, synergy, earnings, EPS,
margin expansion, cost savings and de-levering estimates and goals
as described above and in the investor presentation; (10)
competition from larger and more established companies in Artesyn’s
markets; (11) Advanced Energy’ s ability to successfully
grow Artesyn's business; (12) potential adverse reactions
(including customer reaction) or changes to business relationships
resulting from the announcement or completion of the transaction;
(13) the availability and terms of the financing to be incurred in
connection with the transaction; (14) the retention of key
employees; (15) legislative, regulatory, tariff and economic
developments, including changing business conditions in the
industrial power supply industry overall and the economy in general
as well as financial performance and expectations of Advanced
Energy’s and Artesyn’s existing and prospective customers, and the
other factors described in Advanced Energy’s Annual Report on
Form 10-K for the year ended December 31, 2018 and its most recent
quarterly report filed with the SEC. Advanced Energy
disclaims any intention or obligation to update any forward-looking
statements as a result of developments occurring after the date of
this press release.
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