Summary
Flex Ltd. (FLEX) has filed an 8-K report detailing the completion of the sale of its software development and solutions business to Software Development Group (SDG), an affiliate of Kohlberg Kravis Roberts & Co. (KKR), effective September 1, 2006. This divestiture marks a significant strategic shift for the company. The transaction generated substantial proceeds, comprising $688.5 million in cash (subject to post-closing adjustments) and an $250.0 million promissory note from SDG, with a competitive interest rate structure. Additionally, Flex retains a 15% equity stake in the divested business, aligning its future interests with SDG's performance. This filing also includes unaudited pro forma condensed consolidated balance sheet information as of June 30, 2006, reflecting the impact of this sale. The sale of the software business was accounted for as a discontinued operation, meaning pro forma adjustments primarily impact the balance sheet rather than continuing operations. The transaction was overseen by an independent committee of the Board of Directors, which received a fairness opinion from Merrill Lynch & Co., addressing potential conflicts of interest, notably Michael E. Marks' dual role as Chairman of Flex and a member of KKR.
Key Highlights
- 1Completion of sale of software development and solutions business to SDG (KKR affiliate) on September 1, 2006.
- 2Received $688.5 million in cash proceeds (subject to working capital adjustments).
- 3Received an 8-year, $250.0 million face value promissory note from SDG with a PIK interest coupon (initially 10.5%, then 12.05%).
- 4Retained a 15% equity stake in the divested business through an ownership interest in SDG.
- 5Transaction deemed arm's length with fairness opinion obtained from Merrill Lynch & Co.
- 6Pro forma balance sheet reflects the sale, with the software business previously classified as a discontinued operation.
- 7Chairman Michael E. Marks' affiliation with KKR was disclosed, with the transaction reviewed by an independent board committee.