Singapore-based contract electronics manufacturer Flextronics International Ltd. will buy contract electronics maker Solectron Corp. in a cash-and-stock deal worth about $3.6 billion, the company said Monday.
Solectron will become a subsidiary of Flextronics, with Solectron shareholders holding a stake of between 20 percent to 26 percent.
Solectron shareholders will be able to convert each of their shares into either 0.3450 shares of Flextronics shares or $3.89 per share in cash. The agreement allows only 50 percent to 70 percent of Solectron shares to be converted to Flextronics shares.
The cash portion of the deal is a premium of about 15 percent over Solectron's closing price of $3.37 on the New York Stock Exchange on Friday, while the stock portion represents a 20 percent premium.
"By joining forces, we expect the increased scale will enable us to further extend our market segment reach and leverage an increased vertical integration opportunity, realize significant cost savings, and better serve the needs of our combined customers, employees and shareholders," Flextronics Chief Executive Mike McNamara said in a statement.
Citigroup Global Markets Inc. has committed a $2.5 billion seven-year senior unsecured term loan to fund the cash portion of the acquisition, according to Flextronics, including the refinancing of Solectron's debt if needed.
Solectron will nominate two people to the board of the combined company, subject to approval by Flextronics.
Flextronics expects the deal to add at least 15 percent to its earnings.
The buyout is expected to close by the end of the year with the approval of shareholders and regulators.