News Article

IQE buys Galaxy Semi, seeks to raise $33 million
Date: Sep 30, 2010
Source: ( click here to go to the source)

Featured firm in this article: Galaxy Compound Semiconductors Inc of Spokane, WA

LONDON -- Epitaxial wafer supplier IQE plc has acquired Galaxy Compound Semiconductors Inc., a specialist manufacturer of antimony substrates used in infrared sensing, for up to $14.15 million in cash.

IQE (Cardiff, Wales) has also announced its intention to offer 65 million shares to raise £20.8 million gross (about $33 million). The money will be used to fund the acquisition, selectively expand IQE's manufacturing capacity, repay debt and strengthen the balance sheet.

Galaxy's unaudited management accounting information indicated revenues of $3.0 million, earnings before interest tax depreciation and amortisation (“EBITDA”) of $800,000, profit before taxation of $700,000 and net assets of $1.6 million as at Dec. 31 2009.

Galaxy (Spokane, Wash.), established in 1999, offers indium antimonide (InSb) and gallium antimonide (GaSb) substrates. These are used in infrared imaging systems, including thermal imaging cameras, forward-looking IR for navigation through darkness, heat-seeking missile guidance, detection of heat sources, magneto resistance, biomedical imaging and ultra high speed electronic circuits.

IQE intends to support the expansion of Galaxy by providing $1 million of capital expenditure in 2011.

IQE has agreed to acquire Galaxy for a consideration based on a multiple of up to 5.5 times Galaxy's EBITDA for the year ended Dec. 31 2010, subject to a minimum consideration of $5.4 million in cash and capped at a maximum total consideration of $14.15 million in cash.

IQE has agreed to make quarterly payments to the vendors of Galaxy commencing on Dec. 31 2010. The last payment is payable on 31 December 2012 although this may be accelerated depending on the performance of IQE's share price.

"The strategic acquisition of Galaxy positions IQE as the global leader in the rapidly growing market for antimony based infrared materials that are crucial to advanced imaging systems in a variety of commercial and military applications. Galaxy provides IQE with new manufacturing capacity, new products and significant new clients," said Drew Nelson, IQE chief executive, in a statement. "With funds raised from today's placing, IQE can also selectively expand its existing manufacturing capabilities and a strengthened balance sheet with net funds will position the group for further and more rapid growth."