Silver Lake Partners has agreed to invest $200 million in contract manufacturer

Flextronics

(FLEX) - Get Report

.

The investment is in the form of a zero-coupon, junior subordinated convertible note due March 2008. The note may be converted to Flextronics stock at a conversion price of $10.50 a share.

The Singapore-based manufacturer said the investment, which will be repaid without interest, will be used for general corporate purposes. However, because the company currently has cash and unused lines of credit totaling more than $1.2 billion, it's possible Flextronics may be considering an asset acquisition, like a plant or equipment, or an outright purchase of another company, said analyst Alex Blanton of Ingalls & Snyder.

"If simply invested in the money market, the proceeds will have an immediate positive carry of perhaps a penny a share," he said. Ingalls & Snyder has no banking relationship with Flextronics.

The deal also gives Flextronics an association with "a well-connected and important technology venture fund," Blanton added. According to the company, Silver Lake's Jim Davidson will join Flextronics' board of directors.

Silver Lake took disk drive maker

Seagate

(STX) - Get Report

private in a $1.7 billion deal in November 2000. Seagate went public again late last year.

Shares in Flextronics were up 22 cents, or 2.57%, to $8.78 a share in early afternoon trading Tuesday.