Lite-On will make a tender offer via a Finland-incorporated wholly owned subsidiary to acquire all of the outstanding shares of Perlos. Lite-On has tied up 29.14% of the shares via an agreement with Oy G.W. Sohlberg Ab (GWS). The remaining 71% of shares are quite widely dispersed, with retail shareholders holding around 45%. The board of directors of Perlos is recommending shareholders tender their shares. Lite-On intends to delist Perlos.
The tender offer will be launched at a price of Ç5.20 per share in cash, aggregating to a total equity value of Ç277 million ($379 million). The offer price represents a premium of 40.5% to the closing price on the OMX Nordic Exchange Helsinki on August 10, the last trading day before the announcement and a premium of 23.4% over the volume weighted average trading price during the three months prior to the announcement. The tender offer also covers PerlosÆ 2002 and 2005 option programmes. Lite-On will finance the offer from its cash reserves.
Perlos was founded in 1953 by three Finnish engineers, then in the 1970s GWS, a diversified company, acquired a stake and became its largest shareholder. Perlos has grown to become the world's largest supplier of mobile phone casings with a 16% market share in 2006. Its product portfolio also includes other handset components and services, such as antenna and sub-assembly services.
Perlos has manufacturing facilities in Mexico, Brazil and Hungary and opened new facilities in China and India in early 2007. Lite-On said its current plans envisage Perlos continuing to operate under its own brand and company name, in its current locations.
In 2006, Perlos' net sales were Ç673.6 million, a 10% year-on-year growth over 2005. Geographically the sales breakdown was 35% from Asia, 44% from Europe and 21% from North and South America. For the same period, Perlos made an operating loss of Ç43.6 million. The firm said in its balance sheet that the loss was largely attributable to non-recurring items related to a Perlos customer, BenQ Mobile, as well as the rationalisation of operations in Finland and the US, and the divestment of the healthcare customer group.
The acquisition price represents a firm value to sales multiple of 0.63. Perlos management has given guidance that net sales in 2007 will decrease by more than a quarter over 2006 due to discontinuation of some businesses and lower demand from Finland and North and South America.
Lite-On is a 1975-founded supplier of optoelectronics (combining optics and electronics) components, headquartered in Taiwan. It established Taiwan's first LED operation and its products now include power supply, LCD monitors and imaging products. For handset customers, Lite-On provides phone camera modules, LEDs, keypads, GPS, and various types of sensors.
ôThe acquisition of Perlos will equip Lite-On with mechanical capabilities in addition to electronic component power,ö says David Lin, CEO of Lite-On Group, in a written statement.
Lite-On aims to provide "one-stop-shopping" solutions to customers via a range of component offerings. Perlos will complete the product portfolio by adding mobile phone casings, antenna and sub-assemblies to Lite-OnÆs existing product range. The combination of the companies will strengthen the capabilities of the combined group to provide more products and services to handset customers.
Sources close to the deal comment that the Lite-On takeover of a Scandinavian company is in synch with the trend of the movement of hardware electronics to Asia, including Taiwan, China, India and elsewhere on the continent. In line with this trend, at the end of June 2007, of Perlos' 8,829 employees 5,238 worked in Asia, 2,615 in Europe and 976 in North and South America.
The Lite-On group consists of several fully or partly owned companies, including listed companies in Taiwan, Japan and the US with net sales of $7.2 billion in 2006.
For Citi, buy-side advisor on the Perlos acquisition, this deal cements the relationship it has built with the Lite-On group. Citi has worked on a number of deals across products, with the Taiwanese client, including the 2002 merger of four group companies into Lite-On, as it stands today. The Perlos deal follows Citi's announcement earlier this month that it is advisor to a CVC-led consortium on the delisting of Taiwanese curtain-maker, Nien Made, for $549 million, adding another large Taiwan deal to the US bank's roster.
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