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SINGAPORE — Flextronics International Ltd. announced the sale of its software development and solutions business to an affiliate of Kohlberg Kravis Roberts & Co. (KKR). The deal, which is worth about $900 million, is also expected to bring Flextronics a gain of more than $600 million in cash consideration upon closing. Flextronics will retain a 15% equity stake in the independent business and will hold a $250 million face-value note with a 10.5% paid-in-kind interest coupon. This coupon will mature in eight years. After-tax gain on the sale will total about $175 million.This transaction further adds to its ongoing plan to concentrate efforts and resources on surging growth opportunities in its EMS business, including design, vertically integrated manufacturing services, components, and logistics. "By monetizing non-core assets at substantial gains over carrying values, Flextronics will have generated cash proceeds in excess of $1 billion through the divestitures of our software, network services, and semiconductor businesses, assuming this transaction is consummated," said Michael McNamara, Flextronics' CEO. "In addition, we will have retained ownership interests in both the software and network services businesses, which should provide additional cash and potential future upside when monetized."
Subject to regulatory approvals and other customary closing conditions, the transaction is expected to close this summer.