SMART Global Holdings, Inc (NASDAQ:SGH) unit SMART Modular Technologies (LX) has agreed to sell an 81% interest in SMART Brazil to Lexar Europe B.V. for approximately $166 million in cash.
Lexar Europe is an affiliate of Shenzhen Longsys Electronics Co., Ltd. The purchase price values 100% of SMART Brazil at an initial enterprise value of $205 million.
SMART Brazil assembles and tests modules for electronics manufacturers that sell devices to Brazilian consumers.
In addition to the upfront and deferred cash payments, SGH will retain a 19% interest in SMART Brazil.
“The majority divestiture of our standards-based, commodity module business in Brazil will enable SGH to focus on our strategy of delivering high-performance, high-availability solutions to our enterprise customers,” said Mark Adams, chief executive officer of SGH.
SGH will receive an upfront cash purchase price of $137.7 million at closing. Eighteen months following the closing SGH will receive a deferred cash payment of $28.35 million.
The deal will strengthen the company’s financial position, enabling it to increase strategic investments into domestic research and development and U.S.-based production of advanced technologies.
The company expects this transaction to be accretive to its non-GAAP gross margins immediately post-closing, and sales for SMART Brazil were approximately $114 million for the first half of SGH’s fiscal 2023.
The transaction is expected to close by the end of calendar year 2023.
Price Action: SGH shares are trading higher by 3.41% to $24.55 in the premarket session on the last check Tuesday.
