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Cree to Sell Lighting Business to Ideal Industries

March 15, 2019
Cree will be selling its business to Ideal for approximately $310 million.

Ideal Industries, Sycamore, IL, bolstered its lighting solutions offering in a very big way with last week’s news that it will be buying Cree Inc., Durham, NC, one of the biggest LED manufacturers and best-known brands in the lighting market.

A Cree press release said the company had an agreement to “sell its Lighting Products business unit (Cree Lighting), which includes the LED lighting fixtures, lamps and corporate lighting solutions business for commercial, industrial and consumer application to Ideal Industries for approximately $310 million before tax impacts, including up-front and contingent consideration and the assumption of certain liabilities.”

“Cree expects to receive an initial cash payment of $225 million, subject to purchase price adjustments, and has the potential to receive a targeted earn-out payment of approximately $85 million based on an adjusted EBITDA metric for Cree Lighting over a 12-month period beginning two years after the transaction closes,” the release said.

Cree’s stock price was up +2.5% to approximately $55 per share at the opening of trading on Friday, March 15 after the news was announced.

The sale is part of Cree’s strategy to focus more on its Wolfspeed semiconductor business. Cree said its lighting portfolio and SmartCast Technology are complementary to Ideal’s lighting control business and channel of suppliers, distributors, agents, and customer relationships. Ideal launched its Audacy Advanced Wireless Lighting Control products in 2015, and has aggressively marketed the product line at LightFair in recent years, and through high-visibility installations of the system at stadiums including  the Chicago Cubs' Wrigley Field, the Denver Broncos Mile High Stadium;  on college campuses including UCLA; and the Fermi National Accelerator Laboratory. Ideal has used a blend of lighting reps and electrical reps with a strong focus on the lighting market to sell and support Audacy in the field, as you can see by the lighting reps mentioned on the Audacy website.

“Our combined technology and expertise will continue to build on Cree Lighting’s history of leadership and fits with the advanced systems Ideal has pioneered over the past 103 years,” said Jim James, chairman and CEO of Ideal Industries, in the press release. “Together, we will create a powerful combination of innovation, channel strength and operational excellence. We’re acquiring a very special business poised for sustained success, and we look forward to assisting Cree Lighting in realizing its potential.”

Gregg Lowe, CEO of Cree, said in the release, “Cree has made significant progress over the last 18 months in sharpening the focus of our business to become a semiconductor powerhouse in Silicon Carbide and GaN technologies. Over that time frame, we have grown Wolfspeed by more than 100%, acquired the Infineon RF business, more than doubled our manufacturing capacity of Silicon Carbide materials, and signed multiple long-term supply agreements, which, in aggregate, are in excess of $500 million. With the addition of today’s lighting divestiture news, Cree is well positioned as a more focused semiconductor leader.

“Cree’s technologies are at the forefront of the automotive industry’s transition to zero emission electric vehicles, the telecommunications industry’s move to faster 5G networks and the continued ramp up of LEDs for specialty applications. Our leadership in Silicon Carbide and GaN position us well to capitalize on the tremendous advantages that these technologies offer our customers. This transaction provides significant resources to help accelerate Wolfspeed’s growth while providing a terrific growth opportunity for the Lighting Business and its employees through an expanded channel that strengthens its market position. We believe this decision benefits the company and our employees, shareholders and customers as it unlocks value, increases management focus on the core business and supports our mission to accelerate silicon carbide adoption.”

The closing of the transaction is anticipated to occur in the fourth quarter of fiscal 2019, and is subject to receipt of required regulatory approvals and satisfaction of customary closing conditions.