TEMPE, Ariz., April 5 -- Three-Five Systems Inc. (TFS) announced it has signed a definitive agreement to sell the assets of its small form factor-display business to International Display Works Inc., a Rockland, Calif.-based maker of LCD displays and modules and a provider of outsourced assembly services with facilities in China. Closing of the transaction, subject to normal conditions, is expected within two to four weeks.
TFS's small-form-factor display assets include 100 percent of the outstanding shares of Three-Five Systems, Beijing Inc., the company's China-based display subsidiary, and display-related equipment currently housed at the TFS Manila, Philippines, factory. The sale will not include the display monitor business operated out of the company's Marlborough, Mass., facility or its electronic manufacturing services (EMS) business in Redmond, Wash.; Penang, Malaysia; and Manila, Philippines.
TFS estimates the total value of the transaction is between $11 and $21 million, which will come from a variety of components. These components include $8 million in cash to be paid to TFS at closing; up to an estimated $3 million in additional cash to be paid to TFS over time, based on inventory consumption and accounts receivable collections; and an estimated zero to $9 million in the common stock of International Display Works, to be paid to TFS in May 2006, based on a percentage of the transferred display business revenue for the preceding 12-month period if certain minimum revenue targets are met.
At closing, International Display Works will assume the obligations of TFS Beijing, including a $2.4 million line of credit the company has established with a bank in China.
SG Cowen & Co. represented TFS on the transaction. TFS had retained SG Cowen to review strategic alternatives and will continue to work with the firm with regard to TFS's large display, EMS and radio frequency (RF) module manufacturing businesses. TFS said it is exploring a variety of alternatives -- such as acquisitions, strategic alliances, business combinations and the sale of a portion or all of the company -- and that it is in discussions with potential buyers of its RF business and has received an initial offer from a potential buyer of the EMS business.
For more information, visit: www.tfsc.com