SGH to Acquire Stratus Technologies | Company

MILPITAS, Calif.–(BUSINESS WIRE)–June 29, 2022–

SMART Global Holdings, Inc. (“SGH” or the “Company”) (Nasdaq: GHS ) today announced that it has entered into a definitive agreement with subsidiaries of Siris Capital Group, LLC, to acquire Stratus Technologies (“Stratus”), a global leader in simplified, protected and autonomous computing solutions in the data center and at the edge. Under terms of the agreement, SGH will pay $225 million in cash at closing and an additional payment of up to $50 million, based on the gross margin performance of the Stratus business in the first 12 full fiscal months of Stratus following the closing .

SGH to Acquire Stratus Technologies; will expand the company’s offerings to Edge, Core, Cloud. (Graphic: Business Wire)

Consistent with the company’s existing business lines, Stratus offers differentiated technology solutions to specialized end markets. In particular, the addition of Stratus’ high-availability and fault-tolerant computing platforms, software and services will expand the company’s Intelligent Platform Solutions (“IPS”) business to better serve customers. Stratus and IPS worldwide.

“This transaction builds on our successful M&A experience at SGH,” said Mark Adams, CEO of SGH. “Stratus’ high availability and fault tolerance capabilities will extend our IPS offerings into Edge, Core and Cloud, and allow us to more comprehensively meet the combined needs of our customers.” We look forward to welcoming the Stratus team to SGH.

Strategic and financial advantages

  • Diversified solutions in the data center and at the edge: Stratus’ high-availability and fault-tolerant platforms, software and services expand IPS’ technology offerings.
  • Large scale global customer base: Stratus has a strong global customer base, including more than half of Fortune 100 companies.
  • Differentiated technology: Stratus offers differentiated products and services, consistent with SGH’s focus on providing value-added solutions for specialized end markets.
  • Complete services: Stratus’ services capabilities and infrastructure will add more than $80 million in higher-margin recurring revenue for IPS.
  • A solid financial profile which should be immediately accretive: The transaction is expected to be immediately accretive to gross margin, non-GAAP EPS and free cash flow.

“By joining SGH, we are dramatically expanding our customer reach and capabilities to deliver data center and edge solutions and services, enabling our customers to run their most important mission-critical applications,” said Dave Laurello, president and CEO of Stratus. “We are delighted to join SGH and look forward to helping the company grow. Their operating model and acquisition strategy provides a tremendous opportunity for our customers, partners and employees.

Trading conditions and financing

Under the terms of the agreement, which has been approved by the boards of directors of both companies, SGH will make an upfront cash payment of $225 million upon closing. In addition, Stratus stockholders have the option to receive an earn-out payment of up to $50 million based on the gross profit performance of the Stratus business during the first 12 full fiscal months of Stratus following the closing of the transaction, payable in cash, ordinary shares of SGH, or a combination of cash and ordinary shares of SGH (at the option of SGH). The transaction is subject to required regulatory approvals and satisfaction of customary closing conditions. The transaction is not subject to any financing condition. SGH ended its third fiscal quarter with cash and cash equivalents of $387 million and an additional $250 million revolving credit facility available for use.

Following the closing of the transaction, which is expected to occur in the second half of calendar year 2022, SGH expects to integrate the Stratus brand and trademarks into SGH’s business portfolio and will operate Stratus under its Intelligent PlatformSolutions Group.

For executives digitally transforming their operations to drive predictable peak performance with minimal risk, Stratus ensures the continuous availability of mission-critical applications by providing zero-touch Edge Computing platforms that are simple to deploy and maintain, protected against disruptions and threats, and autonomous. . For 40 years, we’ve provided reliable, redundant contactless computing, enabling global Fortune 500 companies and small and midsize businesses to securely and remotely transform data into actionable intelligence at the edge, cloud and data center. data, which maximizes availability and efficiency. .

At SGH, our businesses are united by a drive to raise the bar, execute with discipline, and focus on the future of technologies that support and advance the world. Through computing, memory and LED lighting solutions, we build long-term strategic partnerships with our customers. Supported by a proven management team, we operate with excellence around the world while opening new avenues of growth for our business and our industry.

Siris is a leading private equity firm that invests primarily in mature technology and telecommunications companies offering critical products and services, facing industry change or other significant transitions. Siris’ development of proprietary research to identify opportunities and its extensive collaboration with its executive partners and advisors are integral to its approach. Siris Executive Partners and Advisors are experienced senior executives who actively participate in key aspects of the deal lifecycle to help identify opportunities and drive strategic and operational value. Siris is based in New York, Silicon Valley and West Palm Beach, and has raised nearly $6 billion in cumulative capital commitments.

Moelis & Company LLC is acting as financial advisor and Latham & Watkins LLP is acting as legal advisor to SGH.

Use of forward-looking statements

This press release contains “forward-looking statements,” including, among other things, statements regarding future events and the future financial performance of SGH and Stratus and statements regarding drivers of growth in SGH and Stratus’ industries and markets. These forward-looking statements are based on current expectations and preliminary assumptions that are subject to factors and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are beyond SGH’s control, including, but not limited to: the inability to obtain or delays in obtaining all regulatory approvals and otherwise the completion of all steps required to complete the acquisition of Stratus; any problems, delays or complications relating to the acquisition of Stratus; incur unexpected costs to complete the acquisition of Stratus; Stratus’ ability to generate anticipated revenues and profits following the closing of the transaction; risks associated with the integration or transition of Stratus’ operations, assets, systems and personnel; adverse reaction to the sale by Stratus’ customers, competitors, suppliers and employees; global business and economic conditions and growth trends in technology industries, SGH’s or Stratus’ customer markets and various geographic regions; uncertainties in the geopolitical environment; disruptions to SGH’s or Stratus’ operations or SGH’s or Stratus’ supply chain as a result of the COVID-19 pandemic or otherwise; changes in trade regulations or adverse developments in international trade relationships and agreements; changes in exchange rates; overall IT spending; appropriations for government expenditures; the success of SGH’s strategic initiatives, including additional investments in new products and additional capacity; business or technology acquisitions, failure to successfully integrate and operate them, or adverse customer reactions thereto; limitations or changes in the availability of the supply of materials and components; fluctuations in material costs; the temporary or volatile nature of price trends in memory or elsewhere; deterioration of customer relationships; production or manufacturing difficulties; competitive factors; technological changes; difficulties or delays in introducing new products; slowing or contraction of memory market growth in Brazil; the reduction or removal of incentives for local manufacturing in Brazil; changes in applicable tax regimes or rates; prices of finished goods from SGH’s or Stratus’ customers; strikes or labor disputes; deterioration or loss of a relationship with any of SGH’s or Stratus’ key suppliers; inability to maintain or expand government operations; and other factors and risks detailed in SGH’s filings with the United States Securities and Exchange Commission, which include SGH’s most recent reports on Forms 10-K and 10-Q, including future documents filed by SGH. These factors and risks as described above and in these materials are not all of the factors and risks that could cause SGH’s actual results to differ materially from SGH’s forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements. These forward-looking statements are made as of the date, and SGH does not intend, and has no obligation, to update or revise the forward-looking statements to reflect events or circumstances that may occur after the date of this press release, except as required by law.

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SOURCE: SMART Global Holdings, Inc.

Copyright BusinessWire 2022.

PUBLISHED: 06/29/2022 16:10 / DISK: 06/29/2022 16:12

Copyright BusinessWire 2022.

Melvin B. Baillie