October 25, 2016, anysilicon
Premstaetten, Austria (24 October 2016) – ams (SIX: AMS), a leading worldwide manufacturer of high performance sensor and analog solutions, has signed an agreement to acquire 100% of the shares in Heptagon, the worldwide leader in high performance optical packaging and micro-optics. With this transaction, ams becomes the clear global leader in optical sensing technologies anticipating industry and technology trends to drive growth in new applications. ams also reports third quarter 2016 revenues and operating profitability around the mid-point of expectations in a more positive consumer market when excluding divestiture and exchange rate effects. ams expects a muted fourth quarter 2016 due to customer-specific, product line yield and non-consumer end market effects with revenues of EUR 127-134 million at a sequentially lower operating margin.
Heptagon is a global leader in micro-optics and optical sensing solutions with particular expertise in high performance optical packaging where the company is positioned as innovation leader. Leveraging advanced optics capabilities in combination with a strong optical design team, Heptagon has built a leading market position as provider of world-class integration and high value packaging solutions in optical sensing.Currently focused on the consumer market, Heptagon is a major supplier into applications for mobile devices requiring high volume optical packaging at very small form factors. Leveraging its advanced technology, Heptagon sees excellent growth opportunities with its current customer base which includes a key customer serving the smartphone and mobile device markets.
Heptagon’s headquarters and manufacturing are based in Singapore while its R&D center is in Rueschlikon, Switzerland. The company has over 830 employees including around 120 engineers and 500 manufacturing staff. Heptagon commands a very strong and protected IP portfolio, primarily in optical packaging, including more than 250 patent families.Heptagon’s current 12 month revenue run rate is around USD 90m at negative operating profitability due to current underutilization of production capacity. Heptagon expects substantial revenue growth over the coming years starting mid-year 2017, based on its existing revenue and capacity pipeline and customer commitments. To prepare for this expected growth, Heptagon has already embarked on a major expansion of its Singapore manufacturing capacity with a total capital investment of more than USD 250m in 2016/2017.
The expansion is based on a confirmed customer commitment for usage of the additional capacity and is fully funded from existing cash in the business, requiring no funding by ams.The transaction combines an upfront consideration in cash and shares with a substantial deferred earn-out consideration. The upfront consideration includes USD 64m in cash from available funds, a capital increase of 15% of outstanding shares from authorized capital (excluding subscription rights) and shares from currently held treasury shares for a total value of the upfront consideration of approx. USD 570m. The earn-out consideration will be contingent on future results of Heptagon’s business over fiscal year 2017 with a potential maximum value of USD 285m. Following the upfront share transaction, current Heptagon shareholders which include financial investors, management, and employees are expected to hold around 20% in ams. The transaction is expected to close within the next three months subject to certain approvals and the occurrence of certain conditions defined in the agreements with the sellers. ams plans to integrate Heptagon into its organization following the closing.The combination of ams and Heptagon forms the clear worldwide leader in end-to-end optical sensing solutions with global scale and the ability to define and drive technology trends and innovation.
Given the increasing value-add of high end packaging technologies for upcoming optical sensor applications the transaction fully leverages ams’ and Heptagon’s outstanding know-how in optical design and manufacturing. ams is convinced that this end-to-end solution capability will allow it to better serve customers in high value optical applications. Adding Heptagon also accelerates the expansion of ams’ capabilities in sensor fusion and sensor hubs. ams’ market access in the consumer and smartphone space is expected to support Heptagon’s customer relationships and broaden its customer base for the combined company’s sensor solutions.Through the addition of Heptagon ams expects to increase and accelerate its mid-term growth opportunities, particularly in consumer optical sensing. Including Heptagon, ams therefore targets business growth of 30% CAGR (compound annual growth rate) for the coming three years combined with a profitability target of 30% operating (EBIT) margin from 2019. Substantial expected ams content increases in the smartphone and mobile device space will serve as important drivers of this expected growth.
Alexander Everke, CEO of ams, commented on the transaction, “Combining ams and Heptagon creates the clear #1 in optical sensing technologies and fast-tracks our innovation capabilities. As a result, we expect ams to drive the optical sensing agenda in the years to come and broaden its market reach. Together with our leadership position in our other sensing focus areas Environmental, Imaging, and Audio, this strategic transaction is going to transform ams into the global leader in sensor solutions.”