Flextronics to Acquire Solectron

- Stock and Cash Transaction Estimated At $3.6 Billion in Equity Value

- Combination Creates Leading Global EMS Company With More Than $30 Billion

in Annual Revenue

Jun 04, 2007, 01:00 ET from Flextronics International Ltd.

    SINGAPORE and MILPITAS, Calif., June 4 /PRNewswire-FirstCall/ --
 Flextronics International Ltd. ("Flextronics") (Nasdaq:   FLEX) and Solectron
 Corporation ("Solectron") (NYSE:   SLR) announced today that the two
 companies have entered into a definitive agreement for Flextronics to
 acquire Solectron, creating the most diversified and premier global
 provider of advanced design and vertically integrated electronics
 manufacturing services ("EMS").
     The combined company will have the broadest worldwide EMS capabilities,
 from design resources to end-to-end vertically integrated global supply
 chain services, which will enhance its ability to design, build, and ship a
 complete package product for its OEM customers. By combining Solectron's
 resources and unique skill sets, Flextronics will be able to provide more
 value and innovation to customers by leveraging the combined global
 economies of scale in manufacturing, logistics, procurement, design,
 engineering and ODM services.
     The enhanced capabilities of the combined company will create more
 value for its customers and increase their competitiveness by improving
 their product development process and supply chain management, while also
 delivering improved product quality with improved performance and faster
     Operating in 35 countries, with a combined workforce of approximately
 200,000 employees, including approximately 4,000 design engineers, the
 combined company's annual revenues will exceed $30 billion across seven
 well- diversified customer market segments and several vertical component
     Transaction Terms
     Under the terms of the definitive agreement, unanimously approved by
 the Boards of Directors of both companies, shareholders of Solectron will
 receive total consideration currently valued at approximately $3.6 billion,
 based on the closing price of Flextronics ordinary shares on June 1, 2007.
     Each share of common stock of Solectron will be converted into the
 right to receive, at the election of each of the individual holders of
 Solectron shares, either, but not a combination of (i) 0.3450 shares of
 Flextronics or (ii) a cash payment of $3.89 per share, subject to the
 limitation that not more than 70% in the aggregate and no less than 50% in
 the aggregate of Solectron shares will be converted into shares of
     As a result, if holders of more than 70% of Solectron's outstanding
 shares elect to receive Flextronics stock, the shares of those holders to
 be converted into Flextronics stock will be proportionately reduced so that
 not more than 70% of Solectron's outstanding shares in the aggregate are
 converted into shares of Flextronics stock, with those holders' remaining
 shares converted into cash. In this case, Solectron shareholders electing
 cash consideration will receive cash consideration for all their shares.
     Alternatively, if holders of more than 50% of Solectron's outstanding
 shares elect to receive cash, the shares of those holders to be converted
 into cash will be proportionately reduced so that not more than 50% of
 Solectron's outstanding shares in the aggregate are converted into cash,
 with those holders' remaining shares converted into shares of Flextronics.
 In this case, Solectron shareholders electing stock consideration will
 receive stock consideration for all their shares.
     In no case (other than by virtue of fractional shares) will
 shareholders who elect to receive the stock consideration receive less than
 70% of their total consideration in Flextronics stock. Alternatively, in no
 case will shareholders who elect to receive cash consideration receive less
 than 50% of their total consideration in cash.
     Based upon Solectron's 909.2 million shares and share equivalents
 outstanding on March 2, 2007, the range of cash to be paid and shares to be
 issued by Flextronics is as follows:
                                                                 Total Value
     Maximum Cash Payments (assuming 50%
      of consideration paid in cash)       $  1,768,419,886   $ 1,768,419,886
     Minimum Number Flextronics shares
      to be issued (assuming 50% of
      consideration to be paid in stock)        156,839,296   $ 1,835,019,761
       Total value as of June 1, 2007                         $ 3,603,439,647
     Minimum Cash Payments (assuming 30%
      of consideration paid in cash)       $  1,061,051,932   $ 1,061,051,932
     Maximum Number Flextronics shares
      to be issued (assuming 70% of
      consideration to be paid in stock)        219,575,014   $ 2,569,027,665
      Total value as of June 1, 2007                          $ 3,630,079,597
     The cash consideration represents a premium of approximately 15% and
 the stock consideration represents a premium of approximately 20% over
 Solectron's closing price of $3.37 on June 1, 2007.
     While Flextronics will continue to evaluate alternative long-term
 financing arrangements, Citigroup Global Markets Inc. has committed to
 provide Flextronics with a $2.5 billion seven-year senior unsecured term
 loan to fund the cash requirements for this transaction (including the
 refinancing of Solectron's debt, if required). Following the acquisition,
 Solectron will become a wholly owned subsidiary of Flextronics, and
 Solectron shareholders will own approximately 20% to 26% of Flextronics's
 outstanding shares.
     As part of the agreement, Solectron has the right to nominate two
 individuals approved by Flextronics to the board of directors of the
 combined company. The transaction is subject to customary closing
 conditions, including shareholder approvals of both companies, certain
 regulatory approvals and other customary closing conditions. The
 acquisition is expected to close by the end of calendar year 2007. Until
 the acquisition is completed, both companies will continue to operate their
 businesses independently.
     Mike McNamara, Chief Executive Officer of Flextronics, said, "Solectron
 is an extremely important strategic addition to Flextronics and this
 combination transforms the landscape of our industry. 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. Solectron's strength in the
 high-end computing and telecom segments will be an invaluable addition to
 Flextronics's existing capabilities and the combined company will be a
 market leader in most product market segments. We will be a larger, more
 competitive company and therefore better positioned to deliver supply chain
 solutions that fulfill our customers' increasingly complex requirements.
 The breadth and depth of the combined company significantly leverages our
 vertical integration capability while taking significant costs out of the
 combined company's infrastructure. The combined company is clearly more
 diversified and formidable than either on its own, and we are better
 positioned to increase shareholder value through greater cash flow and
 earnings." McNamara added, "We are thrilled to add Solectron's customers
 and employees to our organization."
     Paul Tufano, Executive Vice President and Interim Chief Executive
 Officer of Solectron, said, "Flextronics's proven track record,
 complementary market positions, strong balance sheet and stellar reputation
 as a global leader in electronics manufacturing services make the
 combination attractive for our customers, shareholders and employees.
 Specifically, the transaction will provide Solectron's customers with an
 enhanced portfolio of design and vertically integrated capabilities,
 greater scale, and expanded supply chain leverage along with the advantages
 of an increased low cost global footprint." Tufano added, "Combining these
 two companies allows us to transcend what we have accomplished individually
 and significantly reshapes and reenergizes our industry. We believe
 Flextronics has the large scale integration expertise and systems
 infrastructure capable of successfully integrating and managing the
 combined company to ensure all of the significant synergies are realized.
 Flextronics is the best strategic partner for Solectron, and we are
 extremely excited about the potential of this combined company going
 forward and the value creation that it represents. Moreover, with the
 significant stock component offered in the transaction, Solectron's
 shareholders have a meaningful opportunity to participate in the
 realization of that value."
     McNamara concluded by saying, "Over the last 18 months, we have
 reorganized our management structure to create the infrastructure required
 to effectively and efficiently add scale to our operations. As a result, we
 are well prepared to achieve the expected synergies by successfully
 integrating our new partner into our company."
     Financial Expectations
     Thomas J. Smach, Chief Financial Officer of Flextronics, stated, "While
 some synergies will be achieved in the first 12 months after closing, it
 could take up to 18-24 months to fully integrate this acquisition and
 realize the full synergy potential, which we estimate to be at least $200
 million after- tax. This should be at least 15% accretive to Flextronics's
 earnings per share ("EPS") once all of the synergies are realized. As the
 integration progresses and actual synergies are realized, we expect to
 raise our EPS expectations as the accretion occurs over the 18-24 month
 integration period. Although restructuring charges are expected to result
 from the integration of the acquisition, Flextronics expects to generate
 cash flow synergies well in excess of the cash portion of such
 restructuring charges."
     Smach concluded, "This combination is expected to create customer
 benefits, cost reductions and synergies neither company could have achieved
 on its own."
     Citigroup Global Markets Inc. acted as exclusive financial advisor to
 Flextronics in connection with the transaction and Curtis, Mallet-Prevost,
 Colt & Mosle LLP acted as legal advisor to Flextronics. Goldman, Sachs &
 Co. acted as exclusive financial advisor to Solectron in connection with
 the transaction and Wilson Sonsini Goodrich & Rosati acted as legal advisor
 to Solectron.
     Conference Call and Webcast
     A joint conference call hosted by Flextronics and Solectron will be
 held today at 5:30 am PDT to discuss this transaction. This call will be
 broadcast via the Internet and may be accessed by logging on to the
 Investor's section of Flextronics's website located at www.flextronics.com.
 Additional information in the form of a slide presentation that summarizes
 this transaction may also be found on the Flextronics website. A replay of
 the broadcast will remain available on the Flextronics website after the
     Minimum requirements to listen to the broadcast are Microsoft Windows
 Media Player software (free download at
 http://www.microsoft.com/windows/windowsmedia/download/default.asp) and at
 least a 28.8 Kbps bandwidth connection to the Internet.
     About Flextronics
     Headquartered in Singapore (Singapore Reg. No. 199002645H), Flextronics
 is a leading Electronics Manufacturing Services (EMS) provider focused on
 delivering complete design, engineering and manufacturing services to
 automotive, computing, consumer digital, industrial, infrastructure,
 medical and mobile OEMs. With fiscal year 2007 revenues from continuing
 operations of US$18.9 billion, Flextronics helps customers design, build,
 ship, and service electronics products through a network of facilities in
 over 30 countries on four continents. This global presence provides design
 and engineering solutions that are combined with core electronics
 manufacturing and logistics services, and vertically integrated with
 components technologies, to optimize customer operations by lowering costs
 and reducing time to market. For more information, please visit
     About Solectron
     Solectron Corporation is one of the world's largest providers of
 complete product lifecycle services. We offer collaborative design and new
 product introduction, supply chain management, lean manufacturing and
 aftermarket services such as product warranty repair and end-of-life
 support to leading customers worldwide. Solectron works with the world's
 premier providers of networking, telecommunications, computing, storage,
 consumer, automotive, industrial, medical, self-service automation and
 aerospace and defense products. The company's industry-leading Lean Six
 Sigma methodology (Solectron Production System(tm)) provides OEMs with
 quality, flexibility, innovation and cost benefits that improve competitive
 advantage. Based in Milpitas, Calif., Solectron operates in more than 20
 countries on five continents and had sales from continuing operations of
 $10.6 billion in fiscal 2006. For more information, visit us at
     Note: SOLECTRON and the Solectron logo are registered trademarks of
 Solectron Corporation. The Solectron Production System, SPS, and Solectron
 Supply Chain Solutions Suite are also trademarks of Solectron Corporation.
 Other names mentioned are trademarks, registered trademarks or service
 marks of their respective owners.
     Safe Harbor for Forward-Looking Statements
     This press release contains forward-looking statements within the
 meaning of federal securities laws. These forward-looking statements
 include statements related to the expected timing for closing of the
 acquisition of Solectron by Flextronics, the expected synergies and
 benefits to the combined company and its customers from the acquisition,
 the impact of the acquisition on Flextronics's earnings per share, the
 ability of Flextronics to successfully integrate the businesses of the
 combined company, projected revenue and earnings and related growth and
 other statements regarding the anticipated future performance of the
 combined company and the industry in which it operates. These
 forward-looking statements are based on current assumptions and
 expectations and involve risks and uncertainties that could cause actual
 results to differ materially from those anticipated by the forward-looking
 statements. These risks include the possibility that the acquisition may
 not be completed as planned or at all, difficulties or delays in obtaining
 regulatory or shareholder approvals for the proposed transaction, the
 possibility that the revenues, cost savings, growth prospects and any other
 synergies expected from the proposed transaction may not be fully realized
 or may take longer to realize than expected, that growth in the EMS
 business may not occur as expected or at all, the dependence of the
 combined company on industries that continually produce technologically
 advanced products with short life cycles, the ability of the combined
 company to respond to changes and fluctuations in demand for customers'
 products and the short-term nature of customers' commitments, and the other
 risks affecting Flextronics, Solectron and the combined company as
 described in the section entitled "Risk Factors" in the joint proxy
 statement/prospectus to be provided to Flextronics's and Solectron's
 shareholders as well as those described under "Risk Factors" and
 "Management's Discussion and Analysis of Financial Condition and Results of
 Operations" in their quarterly and annual reports and other filings made by
 Flextronics and by Solectron with the U.S. Securities and Exchange
 Commission. The forward-looking statements in this press release are based
 on current expectations and neither Flextronics nor Solectron assumes any
 obligation to update these forward-looking statements, except as required
 by law. Investors are cautioned not to place undue reliance on these
 forward-looking statements.
     Additional Information and Where to Find it:
     In connection with the proposed merger, Flextronics intends to file
 with the Securities and Exchange Commission ("SEC") a Registration
 Statement on Form S-4 that will contain a Joint Proxy Statement/Prospectus.
 Investors and security holders are urged to read the Registration Statement
 and the Joint Proxy Statement/Prospectus carefully when they become
 available because they will contain important information about
 Flextronics, Solectron and the proposed merger. The Joint Proxy
 Statement/Prospectus and other relevant materials (when they become
 available), and any other documents filed with the SEC, may be obtained
 free of charge at the SEC's web site www.sec.gov. In addition, investors
 and security holders may obtain a free copy of other documents filed by
 Flextronics or Solectron by directing a written request, as appropriate, to
 Solectron at 847 Gibraltar Drive, Milpitas, CA 95035, Attention: Investor
 Relations, or to Flextronics's U.S. offices at 2090 Fortune Drive, San
 Jose, CA 95131, Attention: Investor Relations. Investors and security
 holders are urged to read the Joint Proxy Statement/Prospectus and the
 other relevant materials when they become available before making any
 voting or investment decision with respect to the proposed merger.
     This communication shall not constitute an offer to sell or the
 solicitation of an offer to sell or the solicitation of an offer to buy any
 securities, nor shall there be any sale of securities in any jurisdiction
 in which such offer, solicitation or sale would be unlawful prior to
 registration or qualification under the securities laws of such
 jurisdiction. No offering of securities shall be made except by means of a
 prospectus meeting the requirements of Section 10 of the Securities Act of
 1933, as amended.
     Participants in the Solicitation:
     Flextronics, Solectron and their respective directors and executive
 officers may be deemed to be participants in the solicitation of proxies in
 connection with the proposed merger. Information regarding the interests of
 these directors and executive officers in the proposed transaction will be
 included in the Joint Proxy Statement/Prospectus referred to above.
 Additional information regarding the directors and executive officers of
 Flextronics is also included in Flextronics's proxy statement (Form DEF
 14A) for the 2006 annual general meeting of Flextronics shareholders, which
 was filed with the SEC on July 31, 2006. This document is available free of
 charge at the SEC's website (www.sec.gov) and by contacting Flextronics
 Investor Relations at Flextronicsinvestorrelations@flextronics.com.
 Additional information regarding the directors and executive officers of
 Solectron is also included in Solectron's proxy statement (Form DEF 14A)
 for the 2007 annual stockholders meeting of Solectron, which was filed with
 the SEC on December 4, 2006. This document is available free of charge at
 the SEC's website (www.sec.gov) and by contacting Solectron at 847
 Gibraltar Drive, Milpitas, CA 95035, Attention: Investor Relations.

SOURCE Flextronics International Ltd.