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Cree to Sell LED Unit to Smart Global for Up to $300 Million

Cree says the sale of its LED unit will help create a 'pure-play global semiconductor powerhouse.'

Cree  (CREE) - Get Cree, Inc. Report shares rose Monday after the semiconductor and lighting producer announced it agreed to sell its LED unit to Smart Global Holdings  (SGH) - Get SMART Global Holdings, Inc. Report for up to $300 million, including fixed upfront and deferred payments and contingent consideration.

Smart Global makes electronic products focused on memory, computing and storage technology.

“Cree expects to receive an initial cash payment of $50 million upon closing and $125 million to be paid upon maturity of a seller note issued by Smart to Cree due August 2023,” Cree said in a statement.

“Cree also has the potential to receive an earn-out payment of up to $125 million based on the revenue and gross profit performance of Cree LED in the first full four quarters post-transaction close, also payable in the form of a three-year seller note.”

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The sale of Cree’s light-emitting diode unit is part of the company's efforts to streamline its business. 

“The sale of our LED products business represents another key milestone in our transformational journey to create a pure-play global semiconductor powerhouse,” said Cree CEO Gregg Lowe.

“This transaction uniquely positions us with a sharpened strategic focus to lead the industry transition from silicon to silicon carbide and further strengthens our financial position, which will support continued investments to capitalize on multi-decade growth opportunities across EV, 5G and industrial applications,” Lowe added.

Cree shares were at $73.52, up 3.13%, in premarket trading Monday and have soared 55% year to date through Friday. Smart traded at $27.03, up 6.5%, but has sunk 32% so far this year through Friday. 

The companies expect the deal to close in the first quarter of next year.