Cree Acquires Ruud Lighting, Inc. to Accelerate the LED Lighting Revolution

Cree, Inc. has announced the acquisition of Ruud Lighting, Inc., at an estimated net cost of approximately $525 million. Combining two highly complementary LED innovators, the acquisition allows Cree to extend its leadership position and increase the adoption of energy-efficient LED lighting. The companies’ shared focus on best-in-class LED-based systems has led to thousands of LED lighting installations over the past several years.

This acquisition creates a market leader for indoor and outdoor LED lighting, accelerating adoption and expanding the market for both Cree’s LED systems and components. Other synergies include increased access to the lighting market through expanded sales channels and operating leverage from increased economies of scale. Through a broader presence in the lighting systems market, Cree gains additional knowledge and expertise to develop the next generation of industry-leading, lighting-class LED components.

“Cree is taking another bold step in leading the LED lighting revolution, creating a company that has an unrivaled focus and commitment to driving LED lighting adoption,” said Chuck Swoboda, chairman and chief executive officer of Cree.

“Joining Cree was the right thing to do so Ruud Lighting can build on our leadership position; as leaders we create opportunities for everyone,” said Alan Ruud, chairman and chief executive officer of Ruud Lighting.

Ruud Lighting will continue to be based in Racine, Wis., and will operate as a subsidiary as part of Cree’s lighting business. Additionally, Alan Ruud has joined the Cree board. Ruud Lighting, through its BetaLED® product line, was one of the first traditional lighting companies to transform the majority of its business to LED-based systems.

Cree today acquired all of the outstanding stock of Ruud Lighting for an estimated net cost of approximately $525 million, comprised of $372 million in cash, $211 million in stock (valued at today’s market closing price of $34.74/share), $85 million paid concurrently with the acquisition to retire outstanding debt, offset by tax benefits noted below. The stock portion is comprised of 6,074,833 Cree shares. The acquisition was structured for tax purposes as a deemed asset purchase, which means the cost to Cree will be offset by approximately $143 million of expected future tax benefits related to the acquisition.

Ruud Lighting’s financial and operating results will be consolidated for the balance of Cree’s first quarter of fiscal 2012 and Cree is revising its targets for this quarter. These revised targets include approximately 40% of a full quarter’s results from Ruud Lighting. Cree now targets revenue in a range of $265 to $275 million with GAAP gross margin of approximately 37% to 38% and non-GAAP gross margin on the low end of our previous target range of 38% to 39%. GAAP operating expenses are now targeted to increase by approximately $13 million from the previous quarter to $88 million, or $69 million on a non-GAAP basis. The tax rate for the first quarter is now targeted at 21.5%. GAAP net income, which includes expenses related to the transaction is targeted at $9 million to $12 million, or $0.08 to $0.11 per diluted share. Non-GAAP net income is targeted at the low end of our previous target range of $28 million to $31 million, or $0.25 to $0.28 per diluted share. Cree targets this transaction to be slightly dilutive to GAAP earnings for the balance of fiscal 2012 and accretive to non-GAAP earnings for the balance of fiscal 2012. The GAAP and non-GAAP earnings per share targets are based on an estimated 112.9 million diluted shares outstanding. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles of $0.04 per diluted share, stock–based compensation expense of $0.10 per diluted share and one-time acquisition related expenses of $0.03 per diluted share.