sv4
As filed with the Securities and Exchange Commission on
July 11, 2007
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
FLEXTRONICS INTERNATIONAL
LTD.
(Exact name of Registrant as
specified in its charter)
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Singapore
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3672
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Not Applicable
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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One Marina Boulevard, #28-00
Singapore 018989
(65) 6890 7188
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Michael M. McNamara
Chief Executive Officer
Flextronics International Ltd.
One Marina Boulevard, #28-00
Singapore 018989
(65) 6890-7188
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(Address, including zip code,
and telephone number,
including area code, of Registrants principal executive
offices)
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(Name, address, including zip
code, and telephone number,
including area code, of agent for service)
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Copies to:
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Jeffrey N.
Ostrager, Esq.
John D. Nielsen, Esq.
Curtis, Mallet-Prevost, Colt & Mosle LLP
101 Park Avenue
New York, New York 10178
(212) 696-6000
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Steven E. Bochner, Esq.
Michael S. Ringler, Esq.
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
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Approximate date of commencement of proposed sale of the
securities to the public: Upon completion of the merger
described herein.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to Be
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Offering Price
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Aggregate
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Amount of
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Securities to Be Registered
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Registered(1)
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per Share
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Offering Price(2)
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Registration Fee
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Ordinary Shares, no par value
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225,403,837
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N/A
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$
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2,420,174,538
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$
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74,300
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(1)
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This Registration Statement relates
to the ordinary shares, no par value, of the Registrant issuable
to holders of common stock, $0.001 par value per share, of
Solectron Corporation, or Solectron, in the Registrants
proposed acquisition by merger of Solectron. The number of
ordinary shares of the Registrant to be registered pursuant to
this Registration Statement is the product of
(a) 653,344,456, the estimated maximum number of shares of
Solectron common stock that could be exchanged for ordinary
shares of the Registrant pursuant to the merger described
herein, and (b) 0.3450, the exchange ratio under the merger
agreement described herein.
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(2)
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Estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(f)
under the Securities Act of 1933, as amended. The proposed
maximum aggregate offering price is (a) the product of
(i) $3.76, the average of the high and low sales price of
Solectron common stock as reported on the New York Stock
Exchange on July 6, 2007, and (ii) 933,349,224, the
estimated maximum number of shares of Solectron common stock to
be exchanged pursuant to the merger described herein, minus
(b) the minimum cash consideration to be paid by the
Registrant to holders of Solectron common stock pursuant to the
merger described herein.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this joint proxy statement/prospectus is not
complete and may be changed. Flextronics may not sell the
securities offered by this joint proxy statement/prospectus
until the registration statement filed with the Securities and
Exchange Commission is effective. This joint proxy
statement/prospectus is not an offer to sell these securities,
and it is not soliciting an offer to buy these securities in any
jurisdiction where the offer, solicitation or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
JULY 11, 2007
PRELIMINARY COPY
MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
On June 4, 2007, Flextronics International Ltd., Solectron
Corporation and Saturn Merger Corp., a wholly-owned subsidiary
of Flextronics, entered into an agreement and plan of merger
pursuant to which Flextronics will acquire Solectron. If the
merger is completed, Solectron stockholders (including holders
of outstanding restricted shares and former holders of the
exchangeable shares of Solectron Global Services Canada Inc. who
have exchanged their exchangeable shares for Solectron common
stock in connection with the merger) will be entitled to
receive, for each share of Solectron common stock they own and
at the election of the stockholder, either: (i) 0.3450 of a
Flextronics ordinary share, or (ii) a cash payment of
$3.89, without interest. As further described in this joint
proxy statement/prospectus, the merger agreement provides that,
regardless of the elections made by Solectron stockholders, no
more than 70% of Solectrons shares of common stock
outstanding immediately prior to the closing of the merger can
be converted into Flextronics ordinary shares, and no more than
50% of Solectrons shares of common stock outstanding
immediately prior to the closing of the merger can be converted
into cash. Therefore, the cash and stock elections made by
Solectron stockholders will be subject to proration based on
these limits. As a result, Solectron stockholders that have
elected to receive either cash or Flextronics ordinary shares
could in certain circumstances receive a combination of both
cash and Flextronics ordinary shares.
Flextronics ordinary shares are traded on the NASDAQ Global
Select Market under the symbol FLEX. Solectron
common stock is traded on the New York Stock Exchange under the
symbol SLR.
The merger cannot be completed unless Solectron stockholders
adopt the merger agreement and Flextronics shareholders approve
the issuance of Flextronics ordinary shares pursuant to the
merger agreement, each at their respective stockholder meetings.
The completion of the merger is also subject to the satisfaction
or waiver of other conditions that are contained in the merger
agreement. More information about Flextronics, Solectron, the
merger agreement and the merger is contained elsewhere in this
joint proxy statement/prospectus. You are encouraged to read
this joint proxy statement/prospectus carefully before voting,
including the section entitled Risk Factors
beginning on page 26.
The Flextronics board of directors unanimously recommends
that Flextronics shareholders vote FOR the proposal
to approve the issuance of Flextronics ordinary shares pursuant
to the merger agreement.
The Solectron board of directors unanimously recommends that
Solectron stockholders vote FOR the proposal to
adopt the merger agreement.
The proposals are being presented to Flextronics shareholders at
the Flextronics annual general meeting and to Solectron
stockholders at a special meeting of Solectron stockholders. The
dates, times and places of those meetings are as follows:
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For Flextronics
Shareholders:
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For Solectron
Stockholders:
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,
2007, a.m., California
Time
2090 Fortune Drive
San Jose, California, 95131
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2007, a.m., California
Time
847 Gibraltar Drive, Building 5,
Milpitas, California 95035
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Your vote is very important. Whether or not
you plan to attend your respective companys meeting,
please take the time to vote by completing and mailing the
enclosed proxy card to your respective company or, if you are a
stockholder of Solectron, by granting your proxy electronically
over the Internet or by telephone. If your shares are held in
street name, you must provide instructions to your
broker in order to vote.
Sincerely,
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Michael M. McNamara
Chief Executive Officer
Flextronics International Ltd.
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Paul Tufano
Interim Chief Executive Officer and
Executive Vice President
Solectron Corporation
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Neither the Securities and Exchange Commission nor any state
securities commission has approved the Flextronics ordinary
shares to be issued in connection with the merger, or passed
upon the adequacy or accuracy of this joint proxy
statement/prospectus. Any representation to the contrary is a
criminal offense.
This joint proxy statement/prospectus is
dated , 2007, and is first being
mailed to stockholders of
Flextronics and Solectron on or
about , 2007.
FLEXTRONICS
INTERNATIONAL LTD.
(Incorporated
in the Republic of Singapore)
(Company Registration Number 199002645H)
NOTICE OF ANNUAL GENERAL MEETING
OF SHAREHOLDERS
To Be Held on ,
2007
To our shareholders:
You are cordially invited to attend, and NOTICE IS HEREBY GIVEN,
of the annual general meeting of Shareholders of FLEXTRONICS
INTERNATIONAL LTD., which will be held at our principal
U.S. offices located at 2090 Fortune Drive, San Jose,
California, 95131, U.S.A.,
at :00 a.m.,
California Time
on ,
2007, for the following purposes:
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To authorize the directors of Flextronics International Ltd.,
which is referred to in this notice as Flextronics, to allot and
issue ordinary shares pursuant to the Agreement and Plan of
Merger, dated as of June 4, 2007, entered into among
Flextronics, Saturn Merger Corp., a wholly-owned subsidiary of
Flextronics, and Solectron Corporation (Proposal 1);
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To re-elect the following directors: James A. Davidson and
Lip-Bu Tan (Proposal 2);
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To re-appoint Mr. Rockwell A. Schnabel as a director of
Flextronics (Proposal 3);
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To approve the re-appointment of Deloitte & Touche LLP
as Flextronicss independent registered public accounting
firm for the 2008 fiscal year (Proposal 4);
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To approve a general authorization for the directors of
Flextronics to allot and issue ordinary shares
(Proposal 5);
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To approve the cash compensation payable to Flextronicss
non-employee directors (Proposal 6);
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To approve the renewal of the Share Purchase Mandate relating to
acquisitions by Flextronics of its own issued ordinary shares
(Proposal 7); and
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To approve amendments to Flextronicss 2001 Equity
Incentive Plan relating to: (a) a 5,000,000-share increase
in the sub-limit on the maximum number of ordinary shares which
may be issued as stock bonus awards and (b) a
10,000,000-share increase in the share reserve
(Proposals 8 and 9).
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The full text of the resolutions proposed for approval by
Flextronicss shareholders is as follows:
As Special Business
1. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT, pursuant to the provisions of
Section 161 of the Singapore Companies Act, Cap. 50,
authority be and is hereby given for the allotment and issuance
of ordinary shares in the capital of Flextronics to stockholders
of Solectron Corporation pursuant to, and in accordance with,
the Agreement and Plan of Merger, dated as of June 4, 2007,
entered into among Flextronics, Saturn Merger Corp., a
wholly-owned subsidiary of Flextronics, and Solectron
Corporation, which agreement is referred to below as the Merger
Agreement and which provides for the acquisition of Solectron
Corporation by Flextronics, and the directors be and are hereby
authorized to do all acts and to execute and deliver all
instruments or documents as they may deem necessary or desirable
in connection with, or to give effect to, the issuance of the
ordinary shares.
As Ordinary Business
2. To re-elect each of the following Directors, who
will retire by rotation pursuant to Article 95 of
Flextronicss Articles of Association, to the Board of
Directors:
(a) Mr. James A. Davidson; and
(b) Mr. Lip-Bu Tan.
3. To re-appoint Mr. Rockwell A. Schnabel to the
Board of Directors of Flextronics pursuant to
Section 153(6) of the Singapore Companies Act,
Chapter 50, to hold office from the date of this Annual
General Meeting until Flextronicss next Annual General
Meeting.
4. To consider and vote upon a proposal to re-appoint
Deloitte & Touche LLP as Flextronicss
independent registered public accounting firm for the fiscal
year ending March 31, 2008, and to authorize the Board of
Directors, upon the recommendation of the Audit Committee of the
Board of Directors, to fix its remuneration.
As Special Business
5. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT, pursuant to the provisions of
Section 161 of the Singapore Companies Act, Cap. 50, and
without prejudice to the authority conferred pursuant to
Ordinary Resolution No. 1 as set out in the Notice
dated ,
2007 convening this Annual General Meeting to issue ordinary
shares in the capital of Flextronics to stockholders of
Solectron Corporation pursuant to the Merger Agreement (if such
aforementioned resolution has been approved at this Annual
General Meeting), but subject otherwise to the provisions of the
Singapore Companies Act, Cap. 50 and Flextronicss
Articles of Association, authority be and is hereby given to
Flextronicss Directors to:
(a) (i) allot and issue ordinary shares in
Flextronicss capital; and/or
(ii) make or grant offers, agreements or options that
might or would require ordinary shares in Flextronicss
capital to be allotted and issued, whether after the expiration
of this authority or otherwise (including but not limited to the
creation and issue of warrants, debentures or other instruments
convertible into ordinary shares in Flextronicss capital),
at any time to
and/or with
such persons and upon such terms and conditions and for such
purposes as Flextronicss Directors may in their absolute
discretion deem fit, and with such rights or restrictions as
Flextronicss Directors may think fit to impose and as are
set forth in Flextronicss Articles of Association; and
(b) (notwithstanding that the authority conferred by
this resolution may have ceased to be in force) allot and issue
ordinary shares in Flextronicss capital in pursuance of
any offer, agreement or option made or granted by
Flextronicss Directors while this resolution was in force,
and that such authority shall continue in force until the
conclusion of Flextronicss next Annual General Meeting or
the expiration of the period within which its next Annual
General Meeting is required by law to be held, whichever is the
earlier.
6. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT, approval be and is hereby given for
Flextronics to provide:
(a) Annual cash compensation of $60,000 to each of
Flextronicss non-employee Directors for services rendered
as a director;
(b) Additional annual cash compensation of $50,000 to
the Chairman of the Audit Committee (if appointed) of the Board
of Directors of Flextronics for services rendered as Chairman of
the Audit Committee and for his or her participation on the
Audit Committee;
(c) Additional annual cash compensation of $15,000 to
each other non-employee Director of Flextronics who serves on
the Audit Committee for his or her participation on the Audit
Committee;
(d) Additional annual cash compensation of $25,000 to
the Chairman of the Compensation Committee (if appointed) of the
Board of Directors of Flextronics for services rendered as
Chairman of the Compensation Committee and for his or her
participation on the Compensation Committee;
(e) Additional annual cash compensation of $10,000 to
the Chairman of the Nominating and Corporate Governance
Committee (if appointed) of the Board of Directors of
Flextronics for services rendered as Chairman of the Nominating
and Corporate Governance Committee and for his or her
participation on the Nominating and Corporate Governance
Committee;
(f) Additional annual cash compensation of $10,000 to
the Chairman of the Finance Committee (if appointed) of the
Board of Directors of Flextronics for services rendered as
Chairman of the Finance Committee and for his or her
participation on the Finance Committee; and
(g) Additional annual cash compensation of $5,000 to
each of Flextronicss non-employee Directors for their
participation on each standing committee (other than the Audit
Committee) of the Board of Directors on which such Director
serves.
7. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT:
(a) for the purposes of Sections 76C and 76E of
the Singapore Companies Act, Cap. 50, the exercise by
Flextronicss Directors of all of Flextronicss powers
to purchase or otherwise acquire issued ordinary shares in the
capital of Flextronics, not exceeding in aggregate the number of
issued ordinary shares representing 10% of the total number of
issued ordinary shares in the capital of Flextronics as at the
date of the passing of this resolution (excluding any ordinary
shares which are held as treasury shares as at that date), at
such price or prices as may be determined by Flextronicss
Directors from time to time up to the maximum purchase price
described in paragraph (c) below, whether by way of:
(i) market purchases on the NASDAQ Global Select
Market or any other stock exchange on which Flextronicss
ordinary shares may for the time being be listed and quoted;
and/or
(ii) off-market purchases (if effected other than on
the NASDAQ Global Select Market or, as the case may be, any
other stock exchange on which Flextronicss ordinary shares
may for the time being be listed and quoted) in accordance with
any equal access scheme(s) as may be determined or formulated by
Flextronicss Directors as they consider fit, which
scheme(s) shall satisfy all the conditions prescribed by the
Singapore Companies Act, Cap. 50,
and otherwise in accordance with all other laws and regulations
and rules of the NASDAQ Global Select Market or, as the case may
be, any other stock exchange on which Flextronicss
ordinary shares may for the time being be listed and quoted as
may for the time being be applicable, be and is hereby
authorized and approved generally and unconditionally;
(b) unless varied or revoked by Flextronicss
shareholders in a general meeting, the authority conferred on
Flextronicss Directors pursuant to the mandate contained
in paragraph (a) above may be exercised by
Flextronicss Directors at any time and from time to time
during the period commencing from the date of the passing of
this resolution and expiring on the earlier of:
(i) the date on which Flextronicss next Annual
General Meeting is held; or
(ii) the date by which Flextronicss next Annual
General Meeting is required by law to be held;
(c) the maximum purchase price (excluding brokerage,
commission, applicable goods and services tax and other related
expenses) which may be paid for an ordinary share purchased or
acquired by Flextronics pursuant to the mandate contained in
paragraph (a) above, shall not exceed:
(i) in the case of a market purchase of an ordinary
share, the highest independent bid or the last independent
transaction price, whichever is higher, of Flextronicss
ordinary shares quoted or reported on the NASDAQ Global Select
Market at the time the purchase is effected; and
(ii) in the case of an off-market purchase pursuant
to an equal access scheme, 150% of the Prior Day Close Price,
which means the closing price of Flextronicss ordinary
shares as quoted on the
NASDAQ Global Select Market or, as the case may be, any other
stock exchange on which Flextronicss ordinary shares may
for the time being be listed and quoted, on the day immediately
preceding the date on which Flextronics announces its intention
to make an offer for the purchase or acquisition of its ordinary
shares from holders of its ordinary shares, stating therein the
purchase price (which shall not be more than the maximum
purchase price calculated on the foregoing basis) for each
ordinary share and the relevant terms of the equal access scheme
for effecting the off-market purchase; and
(d) Flextronicss Directors
and/or any
of them be and are hereby authorized to complete and do all such
acts and things (including executing such documents as may be
required) as they
and/or he
may consider expedient or necessary to give effect to the
transactions contemplated
and/or
authorized by this resolution.
8. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT:
Approval be and is hereby given for the amendment to
Flextronicss 2001 Equity Incentive Plan, which is referred
to as the 2001 Plan, to increase the sub-limit on the maximum
number of ordinary shares which may be issued as stock bonus
awards under the 2001 Plan from 10,000,000 ordinary shares to
15,000,000 ordinary shares.
9. To pass the following resolution as an Ordinary
Resolution:
RESOLVED THAT:
Approval be and is hereby given to amend the 2001 Plan to
increase the maximum number of ordinary shares authorized for
issuance under the 2001 Plan from 32,000,000 ordinary shares to
42,000,000 ordinary shares and that an additional 10,000,000
ordinary shares be reserved for issuance under the 2001 Plan,
and that such ordinary shares, when issued and paid for in
accordance with the terms of the 2001 Plan, shall be validly
issued, fully-paid and non-assessable ordinary shares in
Flextronicss capital.
10. To transact any other business as may properly
be transacted at any Annual General Meeting.
Notes
At the 2007 annual general meeting, Flextronicss
shareholders will have the opportunity to discuss and ask any
questions that they may have regarding Flextronicss
Singapore audited accounts for the fiscal year ended
March 31, 2007, together with the reports of the directors
and auditors thereon, in compliance with Singapore law.
Shareholder approval of Flextronicss audited accounts is
not being sought by this joint proxy statement/prospectus and
will not be sought at the 2007 annual general meeting.
The board of directors has fixed the close of business
on ,
2007 as the record date for determining those shareholders of
Flextronics who will be entitled to receive copies of this
notice and accompanying joint proxy statement/prospectus.
However, all shareholders of record
on
will be entitled to vote at the 2007 annual general meeting.
Representation of at least
331/3%
of all outstanding ordinary shares of Flextronics is required to
constitute a quorum. Accordingly, it is important that your
shares be represented at the 2007 annual general meeting.
A shareholder entitled to attend and vote at the 2007 annual
general meeting is entitled to appoint a proxy to attend and
vote on his or her behalf. A proxy need not also be a
shareholder. Whether or not you plan to attend the meeting,
please complete, date and sign the enclosed proxy card and
return it in the enclosed envelope. A proxy card must be
received by Flextronics
c/o Proxy
Services,
c/o Computershare
Investor Services, PO Box 43101, Providence, RI
02940-5067
not less than 48 hours before the time appointed for
holding the 2007 annual general meeting. You may revoke your
proxy at any time prior to the time it is voted. Shareholders
who are present at the meeting may revoke their proxies and vote
in person or, if they prefer, may abstain from voting in person
and allow their proxies to be voted.
Only funds legally available for purchasing or acquiring
Flextronicss issued ordinary shares in accordance with
Flextronicss Articles of Association and the applicable
laws of Singapore will be used for the purchase or acquisition
by Flextronics of its own issued ordinary shares pursuant to the
proposed renewal of the Share Purchase Mandate referred to in
Proposal No. 7. Flextronics intends to use its
internal sources of funds
and/or
borrowed funds to finance the purchase or acquisition of its
issued ordinary shares. The amount of financing required for
Flextronics to purchase or acquire its issued ordinary shares,
and the impact on its financial position, cannot be ascertained
as of the date of this notice, as these will depend on the
number of ordinary shares purchased or acquired and the price at
which such ordinary shares are purchased or acquired and whether
the ordinary shares purchased or acquired are held in treasury
or cancelled. Flextronicss net tangible assets and the
consolidated net tangible assets of Flextronics and its
subsidiaries will be reduced by the purchase price of any
ordinary shares purchased or acquired and cancelled. Flextronics
does not anticipate that the purchase or acquisition of its
ordinary shares in accordance with the Share Purchase Mandate
would have a material impact on its consolidated results of
operations, financial condition and cash flows.
By Order of the Board of Directors,
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Bernard Liew Jin Yang
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Yap Lune Teng
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Joint Secretary
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Joint Secretary
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,
2007
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2007
To the Stockholders of Solectron Corporation:
The board of directors of Solectron Corporation has called for a
special meeting of Solectron stockholders to be held
on ,
2007,
at :00 a.m.,
California Time, at Solectrons principal executive offices
at 847 Gibraltar Drive, Building 5, Milpitas, California 95035,
for the following purposes:
1. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of June 4, 2007, by
and among Flextronics, Saturn Merger Corp. and
Solectron; and
2. To transact such other business as may properly be
brought before the Solectron special meeting or any adjournments
or postponements of the Solectron special meeting.
Only holders of record of Solectron common stock and the holder
of the one issued and outstanding share of Series B
Preferred Stock of Solectron at the close of business
on ,
2007, the record date for the special meeting, are entitled to
notice of, and to vote at, the Solectron special meeting or any
adjournments of the special meeting.
We cannot complete the merger unless holders of a majority of
the aggregate voting power of the outstanding shares of
Solectron common stock and the outstanding share of Solectron
Series B Preferred Stock, voting together as one class,
vote in favor of the proposal to adopt the merger agreement and
thus approve the merger. The holder of the outstanding share of
Series B Preferred Stock is entitled to a number of votes
with respect to the share of Series B Preferred Stock equal
to the number of issued and outstanding exchangeable shares of
Solectron Global Services Canada Inc. as of the record date for
this meeting that are not owned by Solectron, any of its
subsidiaries or other affiliates.
For more information about the proposal to adopt the merger
agreement described above and the other transactions
contemplated by the merger agreement, please review the
accompanying joint proxy statement/prospectus and the merger
agreement attached to it as Annex A-1.
The board of directors of Solectron unanimously recommends
that Solectron stockholders vote FOR the proposal to
adopt the merger agreement.
Your vote is important. Whether or not you plan to attend the
special meeting, please complete, sign and date the enclosed
proxy card and return it promptly in the enclosed postage-paid
envelope. You may also cast your vote by telephone or by using
the Internet as described in the instructions included with your
proxy card. Your failure to vote will have the same effect as
voting against the merger.
By Order of the Board of Directors,
Todd DuChene
Executive Vice President,
General Counsel and Secretary
Milpitas, California
,
2007
PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND
INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU
HAVE QUESTIONS ABOUT THE PROPOSAL TO ADOPT THE MERGER
AGREEMENT OR ABOUT VOTING YOUR SHARES, PLEASE CALL
AT
.
TABLE OF
CONTENTS
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iii
REFERENCES
TO ADDITIONAL INFORMATION
Unless the context requires otherwise, when used in this joint
proxy statement/prospectus, Flextronics refers to
Flextronics International Ltd. and its subsidiaries, and
Solectron refers to Solectron Corporation and its
subsidiaries. In this joint proxy statement/prospectus,
references to $ are to United States dollars and
references to S$ are to Singapore dollars.
This joint proxy statement/prospectus incorporates important
business and financial information about Flextronics and
Solectron from documents that each company has filed with the
Securities and Exchange Commission, which is referred to in this
joint proxy statement/prospectus as the SEC, under the
Securities and Exchange Act of 1934, as amended, or the Exchange
Act. For a list of documents incorporated by reference into this
joint proxy statement/prospectus, please see the section
entitled Where You Can Find More Information
beginning on page 183 of this joint proxy
statement/prospectus.
The information incorporated by reference into this joint proxy
statement/prospectus, which has not been included in or
delivered with this joint proxy statement/prospectus, is
available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference
into this joint proxy statement/prospectus by accessing the
SECs website maintained at www.sec.gov.
Additionally, Flextronics will provide you with copies of this
information relating to Flextronics (excluding all exhibits,
unless specifically incorporated by reference in this joint
proxy statement/prospectus) and Solectron will provide you with
copies of this information relating to Solectron (excluding all
exhibits, unless specifically incorporated by reference in this
joint proxy statement/prospectus), in each case, without charge,
upon written or oral request to:
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Flextronics International Ltd.
2090 Fortune Drive
San Jose, California 95131
Attention: Investor Relations
Telephone: (408) 576-7722
|
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Solectron Corporation
847 Gibraltar Drive
Milpitas, California 95035
Attention: Investor Relations
Telephone:
(408) 956-6542
|
In order to receive the documents before the special meeting of
Solectron stockholders or the annual general meeting of
Flextronics shareholders, you must make your requests no later
than ,
2007.
Flextronicss website, which is located at
www.flextronics.com, contains additional information
about Flextronics and provides access to Flextronicss
filings with the SEC. Solectrons website, which is located
at www.solectron.com, contains additional information
about Solectron and provides access to Solectrons filings
with the SEC. Information contained on Flextronicss
website and Solectrons website is not incorporated by
reference in, and should not be considered a part of, this joint
proxy statement/prospectus.
Flextronics and Solectron have both contributed to the
information contained in this joint proxy statement/prospectus
relating to the merger. Any information contained in or
incorporated by reference in this joint proxy
statement/prospectus relating to Flextronics has been supplied
by Flextronics, and any information contained in or incorporated
by reference in this joint proxy statement/prospectus relating
to Solectron has been supplied by Solectron.
v
ABOUT
THIS DOCUMENT
This document, which forms part of a registration statement on
Form S-4
filed with the SEC by Flextronics, constitutes the following:
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a prospectus of Flextronics under Section 5 of the
Securities Act of 1933, as amended, or the Securities Act, with
respect to the Flextronics ordinary shares to be issued to the
holders of Solectron common stock in the merger;
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a proxy statement of Flextronics under Section 14(a) of the
Exchange Act relating to the 2007 annual general meeting of
Flextronics shareholders, at which Flextronics shareholders
will, among other things, consider and vote upon the issuance of
Flextronics ordinary shares pursuant to the merger
agreement; and
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a proxy statement of Solectron under Section 14(a) of the
Exchange Act relating to the special meeting of Solectron
stockholders at which Solectron stockholders will consider and
vote upon the adoption of the merger agreement.
|
vi
QUESTIONS
AND ANSWERS ABOUT THE MERGER
General
Questions and Answers
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Q: |
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Why am I receiving this joint proxy statement/prospectus? |
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A: |
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Flextronics and Solectron have agreed to combine their
businesses under the terms of an Agreement and Plan of Merger,
dated June 4, 2007, by and among Flextronics, Saturn Merger
Corp. and Solectron, which we refer to in this joint proxy
statement/prospectus as the merger agreement. A copy of the
merger agreement is attached to this joint proxy
statement/prospectus as
Annex A-1.
Upon completion of the merger provided for under the merger
agreement, Solectron will become a wholly-owned subsidiary of
Flextronics and, depending on the cash and stock elections made
by Solectron stockholders, former Solectron stockholders are
expected to own between 21% to 27% of the outstanding shares of
the combined company (based on the number of Flextronics
ordinary shares and Solectron common shares outstanding as of
June 1, 2007). Unless we expressly specify otherwise, all
references to the outstanding shares of Solectron common stock
in this joint proxy statement/prospectus include: (i) all
outstanding Solectron restricted shares, and (ii) the
Solectron common stock for which outstanding exchangeable shares
of Solectron Global Services Canada Inc. will be exchanged in
connection with the merger, as described in
Annex F Treatment of Solectron Series B
Preferred Stock and Solectron Global Services Canada Inc.
Exchangeable Shares. |
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In order to complete the merger, Flextronics shareholders must
approve the issuance of Flextronics ordinary shares in
connection with the merger at the 2007 Flextronics annual
general meeting and Solectron stockholders must adopt the merger
agreement at a special meeting of its stockholders held for this
purpose. Flextronics will also ask its shareholders to approve
other matters in connection with its annual general meeting that
are described in this joint proxy statement/prospectus. You
should carefully read this joint proxy statement/prospectus, as
it contains important information about the merger, the
Flextronics annual general meeting and the Solectron special
meeting. For Flextronics shareholders, the enclosed voting
materials for the Flextronics annual general meeting allow
Flextronics shareholders to vote Flextronics ordinary shares
without attending the Flextronics annual general meeting. For
Solectron stockholders, the enclosed voting materials for the
Solectron special meeting allow Solectron stockholders to vote
shares of Solectron common stock without attending the Solectron
special meeting. |
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Q: |
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What will happen upon effectiveness of the merger? |
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A: |
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The merger is structured as an integrated two-step transaction.
In the first step, Saturn Merger Corp., a wholly-owned
subsidiary of Flextronics, will merge with and into Solectron,
with Solectron continuing as the surviving corporation and a
wholly-owned subsidiary of Flextronics. In the second step,
which will occur immediately following the first step and as
part of a single integrated plan, Solectron, as the surviving
corporation of the first merger, will merge with and into Saturn
Merger II Corp., a second wholly-owned subsidiary of
Flextronics, with Saturn Merger II Corp. continuing as the
surviving corporation and as a wholly-owned subsidiary of
Flextronics. |
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If, however, Flextronics or Solectron is unable to obtain an
opinion of counsel to the effect that, for U.S. federal income
tax purposes, the two-step merger will qualify generally as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, referred to in this
joint proxy statement/prospectus as the Code, the merger may be
structured as a single step merger of Saturn Merger Corp. with
and into Solectron, with Solectron continuing as the surviving
corporation and a wholly-owned subsidiary of Flextronics. For
more information, see the sections entitled The Merger
Agreement The Merger beginning on page 85
of this joint proxy statement/prospectus and The
Merger Material U.S. Federal Income Tax Consequences
of the Merger beginning on page 75 of this joint
proxy statement/prospectus. |
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Unless we expressly specify otherwise, when we refer to the
merger in this joint proxy statement/prospectus, we mean both
steps of the two-step merger (or if the merger is effected as a
single step merger of Saturn Merger Corp. into Solectron, that
single step merger), and when we refer to the surviving
corporation we mean |
1
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Saturn Merger II Corp. as the surviving corporation of the
two-step merger (or Solectron, if the merger is effected as a
single step merger of Saturn Merger Corp. with and into
Solectron). |
|
Q: |
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Have the executive officers and directors of Flextronics and
Solectron agreed to vote their shares in favor of the
merger-related proposals? |
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A: |
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Yes, the directors and certain executive officers of Flextronics
have agreed to vote their Flextronics ordinary shares at the
Flextronics annual general meeting in favor of the proposal to
authorize the issuance of Flextronics ordinary shares in the
merger and the directors and executive officers of Solectron
have agreed to vote their Solectron shares at the Solectron
special meeting in favor of the proposal to adopt the merger
agreement. For more information, see the section entitled
The Voting Agreements beginning on page 109 of
this joint proxy statement/prospectus. |
|
Q: |
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Are there risks I should consider in deciding whether to vote
for the merger? |
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A: |
|
Yes. For example, the combined company might not realize the
expected benefits of the merger. In evaluating the merger, you
should carefully consider the factors discussed in the section
entitled Risk Factors beginning on page 26 of
this joint proxy statement/prospectus. |
|
Q: |
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When do Flextronics and Solectron expect to complete the
merger? |
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A: |
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If the stockholders of Solectron adopt the merger agreement and
the shareholders of Flextronics approve the issuance of
Flextronics ordinary shares in connection with the merger, the
merger is expected to be completed following the satisfaction of
the other conditions to the merger, including the receipt of all
governmental and regulatory consents and termination or
expiration of any related waiting period. There may be a
substantial period of time between the approval of the proposals
at the respective meetings of Flextronics shareholders and
Solectron stockholders and the effective date of the merger. The
merger is currently expected to be completed by the end of
calendar year 2007. |
Questions
and Answers for Flextronics Shareholders
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Q: |
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What will Flextronics shareholders receive in the merger? |
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A: |
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Flextronics shareholders will not receive any new Flextronics
ordinary shares as a result of the merger. Flextronics
shareholders will continue to own the Flextronics ordinary
shares they owned before the merger, which will represent stock
ownership in the combined company after the merger. |
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Q: |
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What matters related to the merger will Flextronics
shareholders vote on at the 2007 annual general meeting? |
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A: |
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Flextronics shareholders will vote on a proposal to approve the
issuance of Flextronics ordinary shares in connection with the
merger. Flextronics will also ask its shareholders to approve
other matters in connection with its annual general meeting that
are described in this joint proxy statement/prospectus. See the
section entitled Other Flextronics Proposals
beginning on page 133 of this joint proxy
statement/prospectus. |
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Q: |
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How does the Flextronics board of directors recommend that
Flextronics shareholders vote? |
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A: |
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The Flextronics board of directors unanimously recommends that
Flextronics shareholders vote FOR the proposal to
approve the issuance of Flextronics ordinary shares in
connection with the merger. For a description of factors
considered by the Flextronics board of directors in making its
recommendation, see the section entitled The
Merger Flextronicss Reasons for the Merger and
Board Recommendation beginning on page 49 of this
joint proxy statement/prospectus. |
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The Flextronics board of directors also recommends that
Flextronics shareholders vote FOR the other
proposals being considered at the Flextronics annual general
meeting. For more information on those proposals, see the
section entitled Other Flextronics Proposals
beginning on page 133 of this joint proxy
statement/prospectus. |
2
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Q: |
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When and where is the Flextronics annual general meeting of
shareholders? |
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A: |
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The annual general meeting of Flextronics shareholders will be
held at :00 a.m.,
California Time, on ,
2007, at Flextronicss principal U.S. offices located at
2090 Fortune Drive, San Jose, California. |
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Q: |
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Who is entitled to vote at the Flextronics annual general
meeting? |
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A: |
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The Flextronics Board of Directors has fixed the close of
business
on ,
2007 as the record date for determining those shareholders of
Flextronics who will be entitled to receive notice of the annual
general meeting and this joint proxy statement/prospectus.
However, each shareholder of record
on
will be entitled to attend and vote at the annual general
meeting and will, on a poll, have one vote for each ordinary
share held on the matters to be voted upon. As of July 10,
2007, Flextronics had 608,940,696 ordinary shares issued and
outstanding. |
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Q: |
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How can I vote at the Flextronics annual general meeting? |
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A: |
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Each shareholder of record on the date of the annual general
meeting may vote in person by attending the meeting, by
completing and returning a proxy card or, if you hold your
ordinary shares in street name, by instructing your broker how
to vote. |
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Any Flextronics shareholder that is entitled to attend and vote
at the Flextronics annual general meeting may also appoint a
proxy to attend and vote on his or her behalf. A proxy need not
also be a shareholder. The enclosed proxy card must be
completed, dated and signed and returned in the enclosed
envelope for receipt by Flextronics
c/o Computershare
Investor Services, PO Box 43101, Providence, RI
02940-5067,
not less than 48 hours before the time appointed for
holding the 2007 annual general meeting. Ordinary shares
represented by proxies in the accompanying form which are
properly executed and timely returned to Flextronics will be
voted at the annual general meeting in accordance with the
shareholders instructions. If a properly executed proxy
card does not indicate how the Flextronics ordinary shares
represented by the proxy should be voted, the ordinary shares
will be voted in the manner recommended by the Flextronics board
of directors and therefore FOR the issuance of
shares in connection with the merger. |
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Q: |
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As a Flextronics shareholder, can I change my vote after I
have delivered my proxy? |
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A: |
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Yes, a proxy may be revoked prior to the time it is voted by
timely delivery of a properly executed, later-dated proxy or by
voting in person. |
|
Q: |
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What is the vote of Flextronics shareholders required to
approve the issuance of Flextronics ordinary shares in
connection with the merger? |
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A: |
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The affirmative vote by a show of hands of at least a majority
of the shareholders present and voting at the Flextronics annual
general meeting, or, if a poll is demanded by the chair or by
holders of at least 10% of the total number of paid up
Flextronics ordinary shares in accordance with
Flextronicss Articles of Association, a simple majority of
the shares voting at the annual general meeting, is required to
approve the issuance of Flextronics ordinary shares in
connection with the merger. |
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Q: |
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Who can answer my questions? |
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A: |
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Flextronics shareholders with questions about the merger, the
matters to be voted on at the Flextronics annual general meeting
or who desire additional copies of this joint proxy
statement/prospectus or additional proxy cards should contact: |
Georgeson Inc.
17 State Street 10th Floor
New York, NY 10004
Banks and Brokers call:
(212) 440-9800
All others call:
(888) 605-7554
3
Questions
and Answers for Solectron Stockholders
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Q: |
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What will Solectron stockholders receive in the merger? |
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A: |
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Solectron stockholders will have the right to elect to receive
upon completion of the merger, for each share of Solectron
common stock they hold, either 0.3450 of a Flextronics ordinary
share or a cash payment of $3.89, without interest. However,
under the terms of the merger agreement, Flextronics and
Solectron have agreed that, regardless of the elections made by
Solectron stockholders, no more than 70% of Solectrons
shares of common stock outstanding immediately prior to the
closing of the merger can be converted into Flextronics ordinary
shares, and no more than 50% of Solectrons shares of
common stock outstanding immediately prior to the closing of the
merger can be converted into cash. Therefore, the cash and stock
elections made by Solectron stockholders will be subject to
proration based on these limits. As a result, Solectron
stockholders that have elected to receive either cash or
Flextronics ordinary shares could in certain circumstances
receive a combination of both cash and Flextronics ordinary
shares. Solectron stockholders that fail to make an election
will receive either cash, Flextronics ordinary shares or a
combination of the two, depending on the results of the
elections made by electing Solectron stockholders and the limits
on the aggregate number of Solectron shares that can be
converted to stock consideration and cash consideration in the
merger. The consideration payable to Solectron stockholders in
connection with the merger, and the related election and
proration procedures, are described in more detail in the
section entitled The Merger Agreement Merger
Consideration beginning on page 86 of this joint
proxy statement/prospectus. |
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Based on the number of Flextronics ordinary shares and shares of
Solectron common stock outstanding on June 1, 2007,
Solectrons former stockholders are expected to hold
approximately 21% to 27% of Flextronicss outstanding
ordinary shares following the completion of the merger.
Flextronicss shareholders will continue to own their
Flextronics ordinary shares, which will represent share
ownership in the combined company after the merger. |
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The fraction of a Flextronics ordinary share to be issued for
each share of Solectron common stock is fixed and will not be
adjusted based upon changes in the values of Flextronics
ordinary shares or Solectron common stock. As a result, the
value of the shares Solectron stockholders will receive in the
merger will not be known before the effectiveness of the merger
and will go up or down as the market price of Flextronics
ordinary shares goes up or down. |
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Q: |
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Will holders of exchangeable shares of Solectron Global
Services Canada Inc., a wholly-owned indirect subsidiary of
Solectron, participate in the merger? |
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A: |
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Solectron has agreed to take all action necessary such that each
exchangeable share of Solectron Global Services Canada Inc.,
referred to in this joint proxy statement/prospectus as the
exchangeable shares, will, prior to the closing of the merger,
be exchanged for one share of Solectron common stock. In advance
of this exchange of exchangeable shares for Solectron common
stock, holders of the exchangeable shares will receive election
forms at the same time that holders of Solectron common stock
receive their election forms. Holders of exchangeable shares
will, therefore, be entitled to make the same elections (as if
such holders beneficially owned shares of Solectron common stock
at the time of election, notwithstanding that the exchange will
not occur until after such election is made) for cash or stock
consideration as holders of Solectron common stock and will
receive cash or stock consideration in the same manner and under
the same circumstances as holders of Solectron common stock, as
further described below. |
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For more information about the treatment of the exchangeable
shares, see Annex F Treatment of Solectron
Series B Preferred Stock and Solectron Global Services
Canada Inc. Exchangeable Shares. |
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Q: |
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How and when can Solectron stockholders make elections for
cash consideration or stock consideration? |
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A: |
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Concurrently with the mailing of this joint proxy
statement/prospectus to Solectron stockholders, a form of
election is being separately mailed to Solectron stockholders
that will permit them to make an election for cash or stock
consideration. To be effective, the form of election must be
properly completed and signed and received by the exchange agent
no later than 5:00 p.m., New York City Time, on the later
of (i) the date of the |
4
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Solectron stockholders meeting and (ii) a date
mutually agreed to by Flextronics and Solectron that is as near
as practicable to 10 business days prior to the expected closing
date of the merger agreement (which is referred to in this joint
proxy statement/prospectus as the election deadline).
Flextronics and Solectron will issue a press release announcing
the date of the election deadline not more than 15, but at least
10, business days prior to the election deadline. If a properly
completed and signed form of election with respect to shares of
Solectron common stock is not received by the exchange agent by
the election deadline, then the holder of those shares of
Solectron common stock will be deemed not to have made an
election and will be treated as a non-electing
Solectron stockholder, as described below. Solectron
stockholders that hold their shares in street name
will receive directions from their brokers regarding how to make
elections. Brokers will only make elections with respect to
shares for which they have received proper election instructions
in accordance with their directions. The beneficial owners of
all other shares held in street name will be treated as
non-electing Solectron stockholders, as described below. |
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Will Solectron stockholders receive the specific amount of
cash or stock consideration that they elect to receive? |
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Not necessarily. Elections for cash consideration and stock
consideration will be subject to the proration procedures set
forth in the merger agreement. See the section entitled
The Merger Agreement Merger
Consideration beginning on page 86 of this joint
proxy statement/prospectus. |
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What happens if I do not make an election to receive cash
consideration or stock consideration? |
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A: |
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If you do not make an election, you will have no control over
the type of consideration you receive and may receive only cash,
only Flextronics ordinary shares, or a combination of cash and
Flextronics ordinary shares. The type of consideration you
receive will depend on the outcome of the elections that the
other Solectron stockholders make. If holders of more than 70%
of the shares of Solectron common stock outstanding immediately
prior to completion of the merger have elected to receive
Flextronics ordinary shares, then all non-electing Solectron
stockholders will receive cash for their Solectron shares. If
holders of more than 50% of the shares of Solectron common stock
outstanding immediately prior to completion of the merger have
elected to receive cash, then all non-electing Solectron
stockholders will receive Flextronics ordinary shares for their
Solectron shares. |
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If holders of fewer than 70% of the shares of Solectron common
stock outstanding immediately prior to completion of the merger
have elected to receive Flextronics ordinary shares, and holders
of fewer than 50% of the shares of Solectron common stock
outstanding immediately prior to completion of the merger have
elected to receive cash, then non-electing Solectron
stockholders will receive cash consideration for their Solectron
shares until the aggregate number of Solectron shares being
exchanged for cash consideration equals 50% of the shares of
Solectron common stock outstanding immediately prior to
completion of the merger, and thereafter, non-electing
stockholders will receive Flextronics ordinary shares for their
remaining shares of Solectron common stock. |
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Q: |
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Can Solectron stockholders change or revoke their elections
for cash consideration and/or stock consideration? |
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A: |
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Yes. Any electing Solectron stockholder (including holders of
exchangeable shares) may revoke a previously submitted form of
election by submitting written notice of revocation that is
received by the exchange agent prior to the election deadline,
at the following addresses: |
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By
Mail: By
Overnight Courier: |
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The written notice of revocation must specify the account name
and such other information as the exchange agent may request in
the election form. Revocations may not be in part. Upon revoking
your previous election, you may submit another election in
accordance with the election procedures described in this joint
proxy statement/prospectus. |
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If your Solectron shares are held in street name,
you should follow any instructions for revoking or changing your
election provided by your broker. |
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Q: |
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What if I have Solectron stock options? |
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A: |
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Each outstanding option to purchase shares of Solectron common
stock with an exercise price equal to or less than $5.00,
whether or not exercisable, will be assumed by Flextronics and
converted into an option to purchase Flextronics ordinary
shares, on the same terms and conditions as were applicable to
such Solectron stock option prior to the effective time of the
merger, except that the number of shares for which such option
is or may become exercisable and the exercise price of the
option will be adjusted to reflect the exchange ratio. All other
outstanding options to purchase shares of Solectron common stock
will accelerate and become immediately exercisable for a period
of at least 30 days prior to the effective time, in
accordance with the applicable Solectron stock option plan
pursuant to which such options were granted, but subject to and
conditioned on completion of the merger, and will terminate as
of the effective time to the extent not exercised prior thereto,
as further described under the section entitled The Merger
Agreement Treatment of Solectron Equity Plans
on page 100 of this joint proxy statement/prospectus. |
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What if I have Solectron restricted stock? |
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Holders of shares of Solectron common stock that are unvested or
subject to a repurchase option, risk of forfeiture or other
similar condition under a restricted stock purchase agreement or
other similar arrangement will have the same right to elect to
receive cash or Flextronics ordinary shares as other Solectron
stockholders. As a result, such shares of Solectron restricted
stock will be converted into the right to receive Flextronics
ordinary shares (adjusted to reflect the exchange ratio) or cash
(in an amount equal to $3.89 per share of Solectron restricted
stock), as applicable, which ordinary shares or cash will be
subject to the same vesting requirements or other terms and
conditions that were applicable to the Solectron restricted
stock prior to the effective time of the merger. |
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What are the material U.S. federal income tax consequences of
the merger to Solectron stockholders? |
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Flextronics and Solectron intend that the merger will qualify as
a tax-free reorganization within the meaning of
Section 368(a) of the Code. If the merger qualifies as
such, the U.S. federal income tax consequences of the merger to
each Solectron stockholder will vary depending on whether that
stockholder receives Flextronics ordinary shares, cash, or a
combination of cash and Flextronics ordinary shares in exchange
for that stockholders Solectron common stock. |
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If you are a Solectron stockholder receiving only Flextronics
ordinary shares in exchange for your Solectron common stock, you
generally will not recognize gain or loss on the Solectron
common stock that you surrender pursuant to the merger. If you
are a Solectron stockholder receiving only cash in exchange for
your Solectron common stock, you generally will recognize gain
or loss equal to the difference between the amount of cash you
receive and your tax basis in the Solectron common stock
surrendered. If you are a Solectron stockholder receiving a
combination of cash and Flextronics ordinary shares in exchange
for your Solectron common stock, you generally will recognize
gain (but will not be permitted to recognize loss) for U.S.
federal income tax purposes equal to the lesser of (i) the
amount of cash that you receive and (ii) the amount of gain
that you realize. |
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In certain circumstances, the transaction will not qualify as a
tax-free reorganization under Section 368(a) of the Code.
In that event, you generally would recognize gain or loss on the
shares of Solectron common stock surrendered in the transaction
in the amount of the difference between your basis in such
shares and the sum of the amount of cash and the fair market
value of the Flextronics ordinary shares you receive in exchange
for the shares of Solectron common stock. |
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You should read the section entitled The
Merger Material U.S. Federal Income Tax Consequences
of the Merger beginning on page 75 of this joint
proxy statement/prospectus. In addition, you are urged to
consult your own tax advisors as to the U.S. federal income tax
consequences of the merger, as well as the effect of state,
local and
non-U.S. tax
laws. |
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Q: |
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Are Solectron stockholders entitled to appraisal rights? |
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A: |
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Yes, subject to and in accordance with applicable Delaware law,
holders of Solectron common stock will be entitled to appraisal
rights if they comply with the applicable provisions of Delaware
law. |
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In addition, the holder of the one outstanding share of
Solectrons Series B Preferred Stock may have
appraisal rights under certain circumstances. For more
information, see the section entitled The Merger
Appraisal Rights beginning on page 81 of
this joint proxy statement/prospectus and
Annex G Delaware Appraisal Statute. |
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Q: |
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What matters will Solectron stockholders vote on at the
special meeting? |
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A: |
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Solectron stockholders will vote on the proposal to adopt the
merger agreement. |
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Q: |
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How does the Solectron board of directors recommend that
Solectron stockholders vote? |
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A: |
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The Solectron board of directors, by the unanimous vote of the
directors present, has determined that the merger agreement and
the transactions contemplated by the merger agreement are
advisable and fair to and in the best interests of the Solectron
stockholders and recommends that Solectron stockholders vote
FOR the proposal to adopt the merger agreement. For
a more complete description of the recommendation of the
Solectron board of directors, see the section entitled The
Merger Solectrons Reasons for the Merger and
Board Recommendation beginning on page 56 of this
joint proxy statement/prospectus. |
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Q: |
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When and where will the Solectron special meeting be held? |
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A: |
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The special meeting is scheduled to be held at Solectrons
headquarters at 847 Gibraltar Drive, Building 5, Milpitas,
California 95035,
on ,
2007, at :00 a.m., California
Time. |
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Q: |
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What vote is needed to adopt the merger agreement at the
special meeting? |
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A: |
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The proposal to adopt the merger agreement requires the
affirmative vote of the holders of at least a majority of the
aggregate voting power represented by the Solectron common stock
and the one share of Series B Preferred Stock outstanding
on the record date, voting together as a single class. |
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Each stockholder of Solectron common stock is entitled to one
vote for each share of common stock owned as of the record date,
and Computershare Trust Company of Canada, the holder of
Solectrons one share of Series B Preferred Stock, is
entitled to one vote for each exchangeable share of Solectron
Global Services Canada Inc., an indirect subsidiary of
Solectron, outstanding as of the record date (other than
exchangeable shares owned by Solectron, its subsidiaries and
other affiliates). Holders of Solectron common stock and holders
of exchangeable shares are collectively referred to in this
joint proxy statement/prospectus as the Solectron stockholders. |
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Q: |
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How do Solectron stockholders vote? |
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A: |
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If you were a Solectron stockholder on the record date for the
Solectron special meeting, you may vote at the meeting. Most
stockholders can vote over the Internet or by telephone. If
Internet and telephone voting are available to you, you can find
voting instructions in the materials accompanying this joint
proxy statement/prospectus. You can also vote by completing and
returning a proxy card or, if you hold your shares in street
name, a voting instruction card provided by your broker or
nominee. |
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The Internet and telephone voting facilities will close at
11:59 p.m., New York City Time,
on ,
2007. Please be aware that Solectron stockholders who vote over
the Internet may incur costs such as telephone and Internet
access charges for which they will be responsible. |
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The method by which Solectron stockholders vote will in no way
limit their right to vote at the meeting if such stockholders
later decide to attend in person. If shares are held in street
name, Solectron stockholders must obtain a proxy, executed in
their favor, from a broker or other holder of record, to be able
to vote at the meeting. |
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If Solectron shares are held through a broker or nominee, those
shares may be voted even if the Solectron stockholder does not
vote or attend the special meeting, if the beneficial owner
provides the broker or nominee with voting instructions using
the voting instruction card provided by your broker or nominee.
Under the rules |
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of the New York Stock Exchange, member brokers who do not
receive instructions from beneficial owners will not be allowed
to vote those shares at this special meeting. Therefore, broker
non-votes, if any, will have the same effect as
votes cast against the proposal to adopt the merger agreement. |
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All shares entitled to vote and represented by properly
completed proxies received prior to the Solectron special
meeting and not revoked will be voted at the meeting in
accordance with stockholder instructions. If a signed proxy card
is returned without indicating how shares should be voted on a
matter and the proxy is not revoked, the shares represented by
the proxy will be voted as the Solectron board of directors
recommends and therefore FOR the adoption of the
merger agreement. |
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If you hold exchangeable shares, see
Annex F Treatment of Solectron
Series B Preferred Stock and Solectron Global Services
Canada Inc. Exchangeable Shares for information on the
procedures for voting your exchangeable shares through
Computershare Trust Company of Canada. |
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Q: |
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As a Solectron stockholder, can I change my vote after I have
delivered my proxy? |
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A: |
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Yes. Solectron stockholders may revoke a proxy (including an
Internet or telephone vote) at any time before it is exercised
by timely delivery of a properly executed, later-dated proxy or
by voting in person at the meeting. |
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Q: |
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What will happen if Solectron stockholders abstain from
voting or do not vote? |
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A: |
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If a Solectron stockholder abstains from voting or does not
vote, it will have the same effect as a vote against the
proposal to adopt the merger agreement. If a Solectron
stockholder returns a proxy and does not indicate how it should
be voted, all shares represented by such proxy will be voted in
favor of the proposal to adopt the merger agreement. |
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Q: |
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Should Solectron stock certificates be sent in now? |
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A: |
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No. If the merger is completed, Solectron stockholders will
receive written instructions for sending in any stock
certificates they may have. |
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Q: |
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What do Solectron stockholders need to do now? |
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A: |
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Carefully read and consider the information contained in and
incorporated by reference in this joint proxy
statement/prospectus, including its annexes. In order for shares
to be represented at the Solectron special meeting, Solectron
stockholders can (1) vote over the Internet or by telephone
by following the instructions included on the proxy card,
(2) indicate on the enclosed proxy card how they would like
to vote and return the proxy card in the accompanying
pre-addressed postage paid envelope, or (3) attend the
Solectron special meeting in person. Also, you should send in
your completed and signed election form, as described above. |
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Q: |
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Who can answer my questions? |
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A: |
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Solectron stockholders with questions about the merger, the
Solectron special meeting or who desire additional copies of
this joint proxy statement/prospectus or additional proxy cards
should contact: |
InnisFree M&A Incorporated
501 Madison Avenue,
20th
Floor
New York, New York 10022
Toll Free from within the United States and Canada:
877-825-8971
Banks and Brokers call collect:
212-750-5833
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Holders of exchangeable shares with questions about the merger,
the Solectron special meeting or who desire additional copies of
this joint proxy statement/prospectus or additional exchangeable
share voting information forms or election forms should contact: |
Cristian Couchot
Corporate Trust Officer
Computershare Trust Company of Canada
710,
530-8th
Ave SW
Calgary, Alberta T2P 3S8
Telephone: 403-267-6510
Fax: 403-267-6598
8
SUMMARY
The following is a summary of the information related to the
merger contained in this joint proxy statement/prospectus. This
summary may not contain all of the information about the merger
that is important to you. For a more complete description of the
merger, Flextronics and Solectron encourage you to carefully
read this entire joint proxy statement/prospectus, including the
attached annexes. In addition, Flextronics and Solectron
encourage you to read the information incorporated by reference
into this joint proxy statement/prospectus, which includes
important business and financial information about Flextronics
and Solectron. You may obtain the information incorporated by
reference into this joint proxy statement/prospectus without
charge by following the instructions in the section entitled
Where You Can Find More Information beginning on
page 183 of this joint proxy statement/prospectus.
The
Merger and the Merger Agreement (see pages 44 and
85)
Flextronics has agreed to acquire Solectron pursuant to the
terms of a merger agreement that is described in this joint
proxy statement/prospectus. Under the merger agreement, the
merger will be structured as an integrated two-step transaction.
In the first step, a wholly-owned subsidiary of Flextronics will
merge with and into Solectron, with Solectron continuing as the
surviving corporation and becoming a wholly-owned subsidiary of
Flextronics. In the second step, which will occur immediately
following the first step, Solectron, as the surviving
corporation of the first merger, will merge with and into a
second wholly-owned subsidiary of Flextronics, with this second
subsidiary continuing as the surviving corporation and as a
wholly-owned subsidiary of Flextronics. If, however, Flextronics
or Solectron is unable to obtain an opinion of counsel to the
effect that, for U.S. federal income tax purposes, the
two-step merger will qualify generally as a reorganization
within the meaning of Section 368(a) of the Code, the
merger may be structured as a single merger of a wholly-owned
subsidiary of Flextronics merging with and into Solectron, with
Solectron continuing as the surviving corporation and becoming a
wholly-owned subsidiary of Flextronics.
Upon completion of the merger, each share of Solectron common
stock will be converted into the right to receive 0.3450 of an
ordinary share of Flextronics or $3.89 in cash, without
interest, as merger consideration. Solectrons stockholders
will be able to elect to receive Flextronics ordinary shares or
cash consideration. Each Solectron stockholder will be able to
elect only one type of consideration for all of the Solectron
common stock it owns. Under the merger agreement, however, at
least 50%, but no more than 70%, of the shares of Solectron
common stock outstanding immediately prior to completion of the
merger will be converted into the right to receive Flextronics
ordinary shares, and at least 30% but no more than 50%, of the
shares of Solectron common stock outstanding immediately prior
to completion of the merger will be converted into the right to
receive cash. Therefore, the cash and stock elections made by
Solectron stockholders will be subject to proration based on
these limits. As a result, Solectron stockholders that have
elected to receive either cash or Flextronics ordinary shares
could in certain circumstances receive a combination of both
cash and Flextronics ordinary shares. Solectron stockholders
that fail to make an election will receive cash, Flextronics
ordinary shares or a combination of the two, depending on the
results of the elections made by electing Solectron stockholders
and the limits on the aggregate number of Solectron shares that
can be converted to stock consideration and cash consideration
in the merger.
A copy of the merger agreement is attached as
Annex A-1
to this joint proxy statement/prospectus, and Flextronics and
Solectron encourage you to read the merger agreement in its
entirety.
Election
of Merger Consideration (page 88 and
Annex F)
Concurrently with the mailing of this joint proxy
statement/prospectus, the exchange agent will mail an election
form to Solectron stockholders which is to be used to elect the
form of merger consideration they wish to receive. The exchange
agent will also make available election forms to holders of
Solectron common stock who request such forms before the
election deadline described below. To make an election, a holder
of Solectron common stock must submit a properly completed
election form to the exchange agent by the election deadline.
The deadline for Solectron stockholders to submit their election
forms will be 5:00 p.m., New York City Time, on the later
of (i) the date of the Solectron stockholders meeting
and (ii) a date mutually agreed to by Flextronics and
Solectron that is as near as practicable to 10 business days
prior to the expected closing date of the merger agreement.
Flextronics and Solectron will issue a press release announcing
the date of the election deadline not more than 15, but at least
10, business days prior to the election deadline.
9
The election form will also be mailed to holders of exchangeable
shares that are entitled to direct votes attaching to the one
share of Series B Preferred Stock of Solectron. Holders of
exchangeable shares must observe the same procedures,
restrictions and requirements as holders of Solectron common
stock in order for their election to be timely and properly made.
Solectron stockholders (including holders of exchangeable
shares) may revoke a previously submitted form of election by
submitting written notice of revocation that is received by the
exchange agent prior to the election deadline, at the following
addresses:
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By Mail:
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By Overnight Courier:
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The written notice of revocation must specify the account name
and such other information as the exchange agent may request in
the election form. Revocations may not be in part. Upon revoking
a prior election, Solectron stockholders may submit another
election in accordance with the election procedures described in
this joint proxy statement/prospectus.
Any stockholder holding Solectron shares in street
name should follow any instructions for revoking or
changing their election provided by their broker.
Risk
Factors (see page 26)
The Risk Factors section beginning on page 26
of this joint proxy statement/prospectus should be considered
carefully by Flextronics shareholders and Solectron stockholders
in evaluating whether to approve the respective proposals of
Flextronics and Solectron. These risk factors should be
considered together with the risk factors that are contained in
the reports of Flextronics and Solectron filed with the SEC, and
any other information included in or incorporated by reference
into this joint proxy statement/prospectus.
The
Flextronics Annual General Meeting (see page 37)
Flextronics will hold its annual general meeting of shareholders
on ,
2007, at :00 a.m., California
Time, at Flextronicss principal U.S. offices, 2090
Fortune Drive, San Jose, California, 95131, at which
Flextronics shareholders will be asked to consider and vote upon
the following matters:
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To authorize the directors of Flextronics International Ltd.,
which is referred to in this notice as Flextronics, to allot and
issue ordinary shares pursuant to the Agreement and Plan of
Merger, dated as of June 4, 2007, entered into among
Flextronics, Saturn Merger Corp., a wholly-owned subsidiary of
Flextronics, and Solectron Corporation (Proposal 1);
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To re-elect the following directors: James A. Davidson and
Lip-Bu Tan (Proposal 2);
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To re-appoint Mr. Rockwell A. Schnabel as a director of
Flextronics (Proposal 3);
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To approve the re-appointment of Deloitte & Touche LLP
as Flextronicss independent registered public accounting
firm for the 2008 fiscal year (Proposal 4);
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To approve a general authorization for the directors of
Flextronics to allot and issue ordinary shares
(Proposal 5);
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To approve the cash compensation payable to Flextronicss
non-employee directors (Proposal 6);
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To approve the renewal of the Share Purchase Mandate relating to
acquisitions by Flextronics of its own issued ordinary shares
(Proposal 7); and
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To approve amendments to Flextronicss 2001 Equity
Incentive Plan relating to: (a) a 5,000,000-share increase
in the sub-limit on the maximum number of ordinary shares which
may be issued as stock bonus awards and (b) a
10,000,000-share increase in the share reserve
(Proposals 8 and 9).
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The close of business
on ,
2007 is the record date for shareholders entitled to notice of
the 2007 annual general meeting of Flextronics. All of the
ordinary shares issued
on ,
2007 are entitled to be voted at the 2007 annual general
meeting, and shareholders of record
on ,
2007 and entitled to vote at the meeting will, on a poll, have
one vote for each ordinary share so held on the matters to be
voted upon. As of July 10, 2007, Flextronics had
608,940,696 ordinary shares issued and outstanding. Flextronics
shareholders are entitled to cast one vote per Flextronics
10
ordinary share owned as of the date of the Flextronics annual
general meeting. Eleven directors and executive officers of
Flextronics, who together hold
approximately %
of Flextronics ordinary shares outstanding as of the record
date, have agreed to vote in favor of Proposal No. 1.
Approval of the proposal to authorize the issuance of
Flextronics ordinary shares pursuant to the merger agreement is
a condition to completion of the merger. Adoption of the other
proposals at the Flextronics annual general meeting is not a
condition to completion of the merger.
The
Special Meeting of Solectron Stockholders (see
page 40)
Solectron will hold a special meeting of its stockholders
on ,
2007,
at :00 a.m.,
California Time, at Solectrons principal executive
offices, 847 Gibraltar Drive, Building 5, Milpitas, California
95035, at which Solectron stockholders will be asked to consider
and vote upon a proposal to adopt the merger agreement.
Only holders of record of Solectron common stock and the holder
of the one issued and outstanding share of Series B
Preferred Stock of Solectron at the close of business
on ,
2007, the record date for the special meeting, are entitled to
notice of, and to vote at, the Solectron special meeting or any
adjournments of the special meeting.
The merger cannot be completed unless holders of a majority of
the aggregate voting power represented by the outstanding shares
of Solectron common stock and the outstanding share of Solectron
Series B Preferred Stock, voting together as one class,
vote in favor of the proposal to adopt the merger agreement.
Holders of Solectron common stock are entitled to one vote for
each share of Solectron common stock that such holder
beneficially holds. The holder of the outstanding share of
Series B Preferred Stock is entitled to a number of votes
with respect to the share of Series B Preferred Stock equal
to the number of issued and outstanding exchangeable shares as
of the record date for this meeting that are not owned by
Solectron, any of its subsidiaries or other affiliates. Eighteen
directors and executive officers of Solectron, who together hold
approximately %
of Solectron common stock outstanding as of the record date,
have agreed to vote in favor of the merger.
Flextronicss
Reasons for the Merger and Board Recommendation (see
page 49)
The Flextronics board of directors based its decision to approve
the merger agreement and the merger, and to recommend that
Flextronics shareholders approve the issuance of ordinary shares
in the merger, based on a variety of factors, including, without
limitation, the following anticipated strategic benefits of the
merger:
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Enhanced Competitive Position. Combining
Flextronics and Solectron would create the most diversified and
premier global provider of advanced design and vertically
integrated electronics manufacturing services, or EMS, with the
broadest worldwide EMS capabilities, from design resources to
end-to-end vertically integrated global supply chain services.
The combined company would be able to use its increased scale to
realize significant cost savings and further extend its reach
within established market segments.
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Improved Customer Offering. By adding
Solectrons resources and unique skill sets, Flextronics
would be able to provide more value innovation to its customers
by leveraging the combined global economies of scale in
manufacturing, logistics, procurement, design, engineering, and
ODM services. A larger company would be more competitive and
therefore better positioned to deliver supply chain solutions
that fulfill its customers increasingly complex
requirements. The combined company could help improve the
competitive position of its customers by simplifying their
global product development process while also delivering
improved product quality with enhanced performance and faster
time to market.
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Complementary Businesses. Solectrons
strengths in high-end computing, communications, and networking
infrastructure market segments complement Flextronicss
strengths in vertical integration and ODM capabilities and its
expertise in cell phones and consumer electronics. The combined
company would be a leading EMS supplier of high-end products,
enhancing and leveraging Flextronicss global leadership
position in high-volume, low-cost products. In addition,
Solectrons after-market sales support, repair service, and
build to order/configure to order capabilities would be a
valuable addition to Flextronicss existing end-to-end
vertically-integrated service capabilities.
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Operating Synergies. Over the last
18 months, Flextronics has reorganized its management
structure, creating the infrastructure required to effectively
and efficiently add scale to its operations and enable it to
achieve the synergies expected from the successful integration
of Solectrons operations. The combined company would be
expected to realize cost savings from manufacturing and
operating expense reductions, which will result from global
footprint rationalization and the elimination of redundant
assets or unnecessary functions. Additional costs savings would
be expected from leveraging increased scale and purchasing
power, and the expansion of vertical integration will drive
higher combined profitability. In addition, combined capital
expenditures would be reduced by the redeployment of equipment
and rationalized manufacturing locations.
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Diversification. Flextronicss current
product portfolio is highly concentrated in the mobile segment,
which represented approximately 31% of Flextronicss
revenues for the quarter ended March 31, 2007, followed by
consumer digital at 24%, infrastructure at 23%, industrial,
auto, medical and other at 12%, and computing at 10% of
revenues. By comparison, infrastructure represented 42% of
Solectrons revenues for the quarter ended March 2,
2007, followed by computing at 34%, industrial, auto, medical
and other at 12%, and consumer digital at 12%. Following the
merger, the combined company will have a more diversified and
balanced customer and product mix, especially with regard to the
mobile and infrastructure market segments, which may better
position the combined company to withstand end market, customer
and product volatility in the future.
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After careful consideration, Flextronicss board of
directors unanimously determined that the merger, the merger
agreement and the transactions contemplated by the merger
agreement are advisable and in the interests of Flextronics and
its shareholders. The Flextronics board of directors unanimously
recommends that Flextronics shareholders vote FOR
the proposal to approve the issuance of Flextronics ordinary
shares pursuant to the merger agreement.
Opinion
of Flextronicss Financial Advisor (see
page 51)
Citigroup Global Markets Inc., referred to in this joint proxy
statement/prospectus as Citigroup, has acted as financial
advisor to Flextronics in connection with the merger. Citigroup
made a presentation to the Flextronics board of directors in
which Citigroup reviewed certain financial analyses and rendered
to the Flextronics special acquisition committee of the board of
directors an oral opinion, subsequently confirmed in writing to
the Flextronics board of directors, that as of June 3,
2007, and subject to the factors, assumptions, procedures,
limitations and qualifications set forth in the opinion, the
consideration to be paid by Flextronics in the acquisition is
fair, from a financial point of view, to Flextronics.
The full text of Citigroups written opinion dated
June 3, 2007, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with its opinion, is included as
Annex D to this joint proxy statement/prospectus.
Citigroups opinion was limited solely to the fairness to
Flextronics of the acquisition consideration from a financial
point of view as of the date of the opinion. Neither
Citigroups opinion nor the related analyses constituted a
recommendation of the proposed acquisition to the Flextronics
board of directors. Citigroup makes no recommendation to any
stockholder as to how you should vote or act on any matters
relating to the proposed acquisition. Citigroup was not
requested to consider, and its opinion does not address, the
relative merits of the acquisition compared to any alternative
business strategies that might exist for Flextronics or the
effect of any other transaction in which Flextronics might
engage. This summary of Citigroups opinion is qualified in
its entirety by reference to the full text of the opinion. You
are urged to read Citigroups opinion carefully and in its
entirety.
Solectrons
Reasons for the Merger and Board Recommendation (see
page 56)
The Solectron board of directors identified the following
anticipated strategic and financial benefits of the merger:
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Complementary Businesses. The development,
manufacturing and logistics capabilities of the two companies
are complementary and should enable the combined company to
compete more effectively in the general EMS market. The combined
company should be stronger than either company on its own, with
greater breadth and depth of service offerings and with the
scale and anticipated operational efficiencies that should allow
it to profitably compete. In addition, Flextronicss ODM
capabilities, its vertical integration model, and its continued
targeting of non-traditional EMS market segments (e.g.,
automotive, military/aerospace, industrial and medical) should
allow the combined company to compete effectively in these
market segments, which offer greater growth potential and higher
margins than the traditional EMS market segments. Lastly, the
integration of the Solectron and Flextronics logistics networks
with these manufacturing facilities should create a more
flexible and
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responsive organization that can more quickly react to and
address regional and local changes in market demand and customer
expectations and preferences in the various markets throughout
the world.
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Customers. The combined company should be able
to deepen relationships with many of its existing customers by
leveraging Flextronicss vertical integration capabilities.
Solectron expects the combined company to improve its ability to
expand its current customer relationships and expects to
increase its penetration of new customer accounts. Solectron
believes that the combination of the two companies design,
engineering, manufacturing and logistics capabilities should
enable the combined company to meet customer needs more
effectively and, particularly with the vertical integration
model that Flextronics has been pursuing, to deliver more
complete solutions to customers at a lower cost to those
customers while realizing improved margins for the combined
company. In addition, Solectron believes the larger sales
organization, greater marketing resources and financial strength
of the combined company may lead to improved opportunities for
marketing the combined companys offerings.
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Reduction in Operating Costs. The combined
company is expected to realize substantial cost savings as a
result of increased efficiencies in manufacturing, logistics and
operating expenses. Flextronics and Solectron expect the
combined company to achieve benefits from cost savings from
manufacturing and operating expense reductions resulting from
global footprint rationalization and the elimination of
redundant assets or unnecessary functions; leveraging increased
scale and purchasing power; and the expansion of vertical
integration capabilities within the Solectron customer base.
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Stronger Financial Position. The combined
company will have greater scale and financial resources,
including total cash and cash equivalents. Flextronics and
Solectron expect that this stronger financial position will
improve the combined companys ability to support the
combined companys strategy; to respond more quickly and
effectively to customer needs, technological change, increased
competition and shifting market demand; and to pursue strategic
growth opportunities in the future, including acquisitions.
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Stock-for-Stock with Fixed Exchange Ratio for Stockholders
that Elect Stock. Solectrons stockholders
who receive Flextronics ordinary shares in the merger will share
in the benefits from the growth opportunities, synergies and
cost savings that are expected to be realized by the combined
company as a result of the merger. The fact that the stock
consideration is based on a fixed exchange ratio provides
certainty as to the number of Flextronics ordinary shares that
will be issued to Solectron stockholders who receive Flextronics
ordinary shares in the merger.
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After careful consideration, the Solectron board of directors
unanimously determined that the merger agreement and the
transactions contemplated by the merger agreement, including the
merger, are advisable and fair to and in the best interests of
the Solectron stockholders and has unanimously approved the
merger agreement. The Solectron board of directors unanimously
recommends that the Solectron stockholders vote FOR
the adoption of the merger agreement.
Opinion
of Solectrons Financial Advisor (see
page 60)
Goldman, Sachs & Co., referred to in this joint proxy
statement/prospectus as Goldman Sachs, delivered its opinion to
Solectrons board of directors that, as of June 4,
2007 and based upon and subject to the factors and assumptions
set forth therein, the Stock Consideration and the Cash
Consideration (as such terms are defined in the written opinion
of Goldman Sachs) to be received by the holders of Shares (as
such term is defined in the written opinion of Goldman Sachs),
taken in the aggregate, was fair from a financial point of view
to such holders.
The full text of the written opinion of Goldman Sachs, dated
June 4, 2007, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as
Annex E. Goldman Sachs provided its opinion for the
information and assistance of Solectrons board of
directors in connection with its consideration of the
transaction. The Goldman Sachs opinion does not constitute a
recommendation as to how any holder of Solectrons common
stock should vote or make any election with respect to the
transaction or any other matter. Pursuant to an engagement
letter between Solectron and Goldman Sachs, Solectron has agreed
to pay Goldman Sachs a transaction fee based on 0.32% of the
aggregate consideration paid in the transaction, 25% of which
became payable upon execution of the merger agreement and the
remainder of which is payable upon consummation of the
transaction.
13
Interests
of Solectrons Officers and Directors in the Merger (see
page 67)
When considering the Solectron board of directors
recommendation that Solectron stockholders vote in favor of the
proposal to adopt the merger agreement, Solectrons
stockholders should be aware that Solectrons directors and
executive officers may have interests in the merger that differ
from, or which are in addition to, the interests of Solectron
stockholders. These interests create a potential conflict of
interest and may be perceived to have affected their decision to
support or approve the merger. The Solectron board of directors
was aware of these potential conflicts of interest during its
deliberations on the merits of the merger and in making its
decisions in approving the merger agreement, the merger and the
related transactions. These interests include possible continued
employment of certain executive officers of Solectron by the
combined company, the continuation of indemnification rights and
coverage under existing or new directors and
officers liability insurance policies, accelerated vesting
of stock awards to executive officers and directors and the
receipt of other benefits, including accelerated vesting of
amounts contributed to the accounts of executive officers in the
Solectron Executive Deferred Compensation Plan, that would be
triggered by certain terminations on or following the
consummation of the merger. Solectron stockholders should be
aware of these interests when considering the Solectron board of
directors recommendation to adopt the merger agreement.
Solectron
Is Prohibited from Soliciting Other Offers (see
page 97)
The merger agreement contains detailed provisions that prohibit
Solectron and its subsidiaries, and their officers and
directors, from taking any action to solicit or engage in
discussions or participate in negotiations with any person or
group with respect to an acquisition proposal, as defined in the
merger agreement, including an acquisition that would result in
the person or group acquiring more than a 20% interest in
Solectrons or any of its subsidiaries total
outstanding voting securities, a merger, consolidation or other
business combination involving Solectron or any of its
subsidiaries, a sale, lease outside the ordinary course of
business, exchange, transfer, license outside the ordinary
course of business, acquisition or disposition of more than 20%
of the assets of Solectron (including its subsidiaries taken as
a whole), or any liquidation or dissolution of Solectron.
Solectron is also required to use all reasonable best efforts to
cause its advisors to comply with these restrictions. The merger
agreement does not, however, prohibit Solectron or its board of
directors from considering and, in certain circumstances, from
potentially recommending, an unsolicited bona fide written
acquisition proposal from a third party if specified conditions
are met.
Change of
Board Recommendation (see page 96)
Subject to specified conditions, the board of directors of
Solectron may withdraw or modify its recommendation in support
of the adoption of the merger agreement by Solectrons
stockholders. In the event that the board of directors of
Solectron withdraws or modifies its recommendation in a manner
adverse to Flextronics, Solectron may be required to pay a
termination fee of $100.0 million to Flextronics.
Flextronics
and Solectron May Terminate the Merger Agreement under Specified
Circumstances (see page 106)
Under circumstances specified in the merger agreement, either
Flextronics or Solectron may terminate the merger agreement.
These circumstances generally include if:
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Flextronics and Solectron mutually agree to terminate the merger
agreement;
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if the merger is not completed by December 31, 2007,
provided that either party may extend such date to
March 31, 2008, if the condition requiring approvals and
consents (including the termination of any waiting period) under
merger notification and control laws shall not have been
satisfied;
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if any governmental entity issues any order or takes any other
action having the effect of permanently restraining, enjoining
or prohibiting the completion of the merger;
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if Solectron stockholders fail to adopt the merger agreement or
Flextronics shareholders fail to authorize the issuance of
Flextronics ordinary shares in the merger;
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if any party breaches its representations, warranties or
covenants in the merger agreement such that the conditions to
completion of the merger regarding its representations,
warranties or covenants would not be satisfied, subject to a
30-day cure
period;
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if there has been, or any event has occurred since the date of
the merger agreement that would reasonably be expected to have,
a material adverse effect on Solectron, and (i) the
material adverse effect is not reasonably capable of being cured
prior to the termination date of the merger agreement, or
(ii) the material adverse effect is not cured prior to the
earlier of the termination date and 30 days following the
receipt of written notice from Flextronics to Solectron of the
material adverse effect (which right to terminate may only be
exercised by Flextronics), provided that Flextronics may not
exercise this termination right if it is in material breach of
the merger agreement; or
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there has been, or any event has occurred since the date of the
merger agreement that would reasonably be expected to have, a
material adverse effect on Flextronics, and (i) the
material adverse effect is not reasonably capable of being cured
prior to the termination date of the merger agreement, or
(ii) the material adverse effect is not cured prior to the
earlier of the termination date and 30 days following the
receipt of written notice from Solectron to Flextronics of the
material adverse effect (which right to terminate may only be
exercised by Solectron), provided that Solectron may not
exercise this termination right if it is in material breach of
the merger agreement.
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Additionally, prior to the adoption of the merger agreement by
Solectrons stockholders, Flextronics may terminate the
merger agreement if the board of directors of Solectron takes
certain specified actions in opposition to the merger that are
described as triggering events in the merger agreement.
Solectron may terminate the merger agreement if it enters into a
definitive agreement with respect to an alternative acquisition
under specified conditions and pays the termination fee to
Flextronics.
Payment
of a Termination Fee under Specified Circumstances (see
page 108)
If the merger agreement is terminated under specified
circumstances, Solectron could be required to pay a termination
fee of $100.0 million to Flextronics and, in certain other
specified circumstances, Flextronics could be required to pay a
termination fee of $100.0 million to Solectron.
What Is
Needed to Complete the Merger (see page 104)
Several conditions must be satisfied or waived before
Flextronics and Solectron complete the merger, including those
summarized below:
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the adoption of the merger agreement by Solectrons
stockholders and the authorization of the issuance of
Flextronics ordinary shares in the merger by Flextronicss
shareholders;
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the effectiveness of the registration statement of which this
joint proxy statement/prospectus forms a part;
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the absence of any law, regulation or order making the merger
illegal or otherwise prohibiting the merger;
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the expiration or termination of any applicable waiting periods
and the receipt of any consents, waivers or approvals required
under applicable U.S. and foreign merger control
regulations;
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the accuracy of each companys representations and
warranties in the merger agreement in all respects as of the
date of the merger agreement and as of the closing date, except
those representations and warranties which address matters only
as of a particular date, which must be true and correct as of
that date, and except for representations and warranties where
failure to be true and correct did not and would not reasonably
be expected to have, individually or in the aggregate, a
material adverse effect on the company;
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material compliance by each party with its agreements and
covenants in the merger agreement; and
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the absence of any change, circumstance or effect which,
individually or in the aggregate, has had or would reasonably be
expected to have a material adverse effect on either party.
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If the law permits, either Solectron or Flextronics could choose
to waive a condition to its obligation to complete the merger
even though that condition has not been satisfied.
In addition, the obligation of Flextronics and Solectron to
consummate the merger as a two-stop merger is subject to their
receipt of an opinion from their respective tax counsel that the
merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code, as amended, and that
no gain (except to
15
the extent of cash received) will be recognized by Solectron
stockholders, other than by certain stockholders in certain
situations.
Treatment
of Exchangeable Shares and Series B Preferred Stock (see
Annex F)
Under the merger agreement, Solectron has agreed to take all
action necessary to cause 3942163 Canada Inc., or Callco, a
wholly-owned indirect subsidiary of Solectron, to acquire, prior
to the effective time of the merger, all the issued and
outstanding exchangeable shares, by exercising its overriding
redemption call right pursuant to the terms and conditions of
the exchangeable shares. The purchase price payable by Callco in
connection with the exchange, in respect of each exchangeable
share, is one share of Solectron common stock (including an
amount equal to the full amount of all declared but unpaid
dividends on such exchangeable share, if any, and subject to
applicable withholding taxes), which Solectron common stock will
be issued prior to the effective time of the merger.
Upon completion of the exchange of exchangeable shares and prior
to the effective time of the merger, Solectron will cause the
one issued and outstanding share of Series B Preferred
Stock in its capital to be cancelled in accordance with its
terms.
Board of
Directors and Management of the Combined Company
Under the terms of the merger agreement, Flextronics will
appoint to its board of directors two individuals designated by
Solectron and approved by Flextronics upon consummation of the
merger, to hold office until their earlier resignation or
removal in accordance with Flextronicss Memorandum and
Articles of Association. Following the merger, one or more of
the executive officers of Solectron may become executive
officers of Flextronics. In connection therewith, Flextronics
may enter into compensatory arrangements with one or more
executive officers of Solectron, which arrangements may include
payments of cash
and/or
grants of equity securities of Flextronics.
Material
U.S. Federal Income Tax Consequences of the Merger (see
page 75)
The two-step merger has been structured to qualify as a
reorganization within the meaning of
Section 368(a) of the Code, and it is a condition to
closing that each of Flextronics and Solectron receive an
opinion from legal counsel to the effect that the merger will so
qualify. If the two-step merger qualifies as a reorganization,
the U.S. federal income tax consequences of the merger to
each Solectron stockholder will vary depending on whether that
stockholder receives Flextronics ordinary shares, cash, or a
combination of cash and Flextronics ordinary shares in exchange
for that stockholders Solectron common stock.
If a Solectron stockholder receives only Flextronics ordinary
shares in exchange for its Solectron common stock, that
stockholder generally will not recognize gain or loss on the
Solectron common stock surrendered pursuant to the merger. If a
Solectron stockholder receives only cash in exchange for its
Solectron common stock, that stockholder generally will
recognize gain or loss equal to the difference between the
amount of cash received and such stockholders tax basis in
the Solectron common stock surrendered. If a Solectron
stockholder receives a combination of cash and Flextronics
ordinary shares in exchange for its Solectron common stock, such
stockholder generally will recognize gain (but will not be
permitted to recognize loss) for U.S. federal income tax
purposes equal to the lesser of (i) the amount of cash that
received, and (ii) the amount of gain realized by that
stockholder.
If, however, Flextronics or Solectron is unable to obtain an
opinion of counsel to the effect that, for U.S. federal
income tax purposes, the two-step merger will qualify generally
as a reorganization within the meaning of Section 368(a) of
the Code, the transaction may be structured as a single-step
merger of a wholly-owned subsidiary of Flextronics with and into
Solectron, with Solectron continuing as the surviving
corporation and becoming a wholly-owned subsidiary of
Flextronics, in which case the transaction will not qualify as a
tax-free reorganization under Section 368(a) of the Code.
In that event, Solectron stockholders generally would recognize
gain or loss on the shares of Solectron common stock surrendered
in the transaction in the amount of the difference between their
basis in such shares and the sum of the amount of cash and the
fair market value of the Flextronics ordinary shares received in
exchange for the shares of Solectron common stock.
Solectron stockholders are urged to read the discussion in the
section entitled Solectron Proposal and Flextronics
Proposal No. 1 The Merger Material
U.S. Federal Income Tax Consequences of the Merger
16
beginning on page 75 of this joint proxy
statement/prospectus and to consult their tax advisors as to the
U.S. federal income tax consequences of the merger, as well
as the effect of state, local and
non-U.S. tax
laws.
Flextronics
Financing (see page 79)
Flextronics estimates that it will require up to approximately
$1.9 billion to pay the cash portion of the merger
consideration, including acquisition and financing related
costs, assuming 50% of Solectrons outstanding shares elect
to receive cash. Flextronics currently has a $2.0 billion
credit facility through a syndicate of banks led by Bank of
America, N.A. Simultaneously with execution of the merger
agreement, Flextronics and Citigroup agreed to the terms of a
commitment letter pursuant to which Citigroup has committed to
provide Flextronics with a seven-year, senior unsecured term
loan facility of up to $2.5 billion to fund the cash
requirements for the transaction, including the repurchase or
refinancing of Solectrons debt, if required. The merger is
not conditioned on receipt of financing by Flextronics and
Flextronics continues to evaluate alternative long-term
financing arrangements.
The
Merger Is Subject to Approval of Regulatory Authorities (see
page 80)
In order to complete the merger, Flextronics and Solectron must
notify, furnish information to, and, where applicable, obtain
clearance from competition authorities in Brazil, Canada, China,
the European Commission, Mexico, Turkey and Ukraine. Flextronics
and Solectron will also notify and furnish information to, on a
voluntary basis, the competition authorities in Singapore. The
merger is also subject to U.S. antitrust laws and, as such,
is subject to review by the Department of Justice
and/or the
Federal Trade Commission under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or the HSR Act.
Flextronics and Solectron have made their filings under the HSR
Act, and have made or will make the necessary filings with
competition authorities in the remaining jurisdictions. Although
Flextronics and Solectron expect to obtain the required
regulatory approvals in all of these jurisdictions, there can be
no assurance that Flextronics and Solectron will obtain the
regulatory approvals necessary or that the granting of these
regulatory approvals will not involve the imposition of
conditions on the completion of the merger or require changes to
the terms of the merger. In addition, in some jurisdictions, a
competitor, customer or other third party could initiate a
private action under the antitrust or other laws challenging or
seeking to enjoin the merger, before or after it is completed.
Trading
of Flextronics Ordinary Shares Received in the Merger; Delisting
of Solectron Common Stock and Exchangeable Shares
If Flextronics and Solectron complete the merger, Solectron
stockholders will be able to trade the Flextronics ordinary
shares they receive in the merger on the NASDAQ Global
Select Market, subject to restrictions on affiliates of
Solectron. If Flextronics and Solectron complete the merger,
Solectron common stock will no longer be listed on the New York
Stock Exchange or any other market or exchange. Further,
Solectron Global Services Canada Inc. exchangeable shares will
be delisted from the Toronto Stock Exchange.
Appraisal
Rights (see page 81)
Under Delaware law, Solectron stockholders that hold Solectron
common stock are entitled to appraisal rights if they comply
with the applicable provisions of Delaware law. Additionally,
under Delaware law, if the record holder of the one share of
Solectron Series B Preferred Stock does not vote in favor
of the adoption of the merger agreement at the Solectron special
meeting, then the record holder has the right to seek an
appraisal of, and to be paid the fair value for, the
Series B Preferred Stock if the stockholder otherwise
complies with the applicable provisions of Delaware law.
To obtain an appraisal, Solectron stockholders must submit a
written demand for an appraisal before the vote on the approval
of the merger agreement and must continue to hold their
Solectron shares until the effective date of the merger.
Solectron stockholders must also comply with other procedures as
required by Delaware law. If Solectron stockholders validly
demand appraisal of their shares in accordance with Delaware law
and do not withdraw their demand or otherwise forfeit their
appraisal rights, they will not receive the merger
consideration. Instead, after completion of the proposed merger,
a court will determine the fair value of their shares exclusive
of any value arising from the proposed merger. This appraisal
amount will be paid in cash and could be more than, the same as
or less than the amount a Solectron stockholder would be
entitled to receive under the terms of the merger agreement.
17
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF FLEXTRONICS
The selected historical consolidated financial data for each
year in the five-year period ended March 31, 2007, were
derived from Flextronicss consolidated financial
statements for those periods. This information is only a summary
and should be read in conjunction with Flextronicss
historical consolidated financial statements and related notes
and the sections entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations
contained in the annual and quarterly reports of Flextronics and
in conjunction with the other information that Flextronics has
filed with the SEC which have been incorporated by reference
into this joint proxy statement/prospectus. See the section
entitled Where You Can Find More Information
beginning on page 183 of this joint proxy
statement/prospectus.
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Fiscal Year Ended March 31,
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2007
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2006
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2005
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2004
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2003
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(In thousands, except per share amounts)
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
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Net sales
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$
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18,853,688
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$
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15,287,976
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$
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15,730,717
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$
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14,479,262
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$
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13,329,197
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Cost of sales
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17,777,859
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14,354,461
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14,720,532
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13,676,855
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12,626,105
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Restructuring charges(1)
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146,831
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185,631
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78,381
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474,068
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266,244
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Gross profit
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928,998
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747,884
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931,804
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328,339
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436,848
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Selling, general and
administrative expenses
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547,538
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463,946
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525,607
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469,229
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434,615
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Intangible amortization
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37,089
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|
|
|
37,160
|
|
|
|
33,541
|
|
|
|
34,543
|
|
|
|
20,058
|
|
Restructuring charges(1)
|
|
|
5,026
|
|
|
|
30,110
|
|
|
|
16,978
|
|
|
|
54,785
|
|
|
|
30,711
|
|
Other (income) charges, net(2)
|
|
|
(77,594
|
)
|
|
|
(17,200
|
)
|
|
|
(13,491
|
)
|
|
|
|
|
|
|
7,456
|
|
Interest and other expense, net
|
|
|
91,986
|
|
|
|
92,951
|
|
|
|
89,996
|
|
|
|
77,241
|
|
|
|
92,774
|
|
Gain on divestiture of operations
|
|
|
|
|
|
|
(23,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of
debt
|
|
|
|
|
|
|
|
|
|
|
16,328
|
|
|
|
103,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes
|
|
|
324,953
|
|
|
|
164,736
|
|
|
|
262,845
|
|
|
|
(411,368
|
)
|
|
|
(148,766
|
)
|
Provision for (benefit from)
income taxes
|
|
|
4,053
|
|
|
|
54,218
|
|
|
|
(68,652
|
)
|
|
|
(64,958
|
)
|
|
|
(64,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
320,900
|
|
|
|
110,518
|
|
|
|
331,497
|
|
|
|
(346,410
|
)
|
|
|
(83,779
|
)
|
Income (loss) from discontinued
operations, net of tax
|
|
|
187,738
|
|
|
|
30,644
|
|
|
|
8,374
|
|
|
|
(5,968
|
)
|
|
|
326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
508,638
|
|
|
$
|
141,162
|
|
|
$
|
339,871
|
|
|
$
|
(352,378
|
)
|
|
$
|
(83,453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.54
|
|
|
$
|
0.18
|
|
|
$
|
0.57
|
|
|
$
|
(0.66
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
$
|
0.31
|
|
|
$
|
0.05
|
|
|
$
|
0.01
|
|
|
$
|
(0.01
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.85
|
|
|
$
|
0.24
|
|
|
$
|
0.58
|
|
|
$
|
(0.67
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands)
|
|
|
CONSOLIDATED BALANCE SHEET
DATA(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
1,102,979
|
|
|
$
|
938,632
|
|
|
$
|
906,971
|
|
|
$
|
884,816
|
|
|
$
|
897,741
|
|
Total assets
|
|
|
12,341,374
|
|
|
|
10,958,407
|
|
|
|
11,009,766
|
|
|
|
9,583,937
|
|
|
|
8,394,104
|
|
Total long-term debt and capital
lease obligations, excluding current portion
|
|
|
1,493,805
|
|
|
|
1,489,366
|
|
|
|
1,709,570
|
|
|
|
1,624,261
|
|
|
|
1,049,853
|
|
Shareholders equity
|
|
|
6,176,659
|
|
|
|
5,354,647
|
|
|
|
5,224,048
|
|
|
|
4,367,213
|
|
|
|
4,542,020
|
|
|
|
|
(1) |
|
Flextronics recognized restructuring charges of
$151.9 million, $215.7 million, $95.4 million,
$540.3 million (including $11.5 million attributable
to discontinued operations) and $297.0 million in fiscal
years 2007, 2006, 2005, 2004 and 2003, respectively, associated
with the consolidation and closure of several manufacturing
facilities. |
|
(2) |
|
Flextronics recognized $79.8 million, $20.6 million
and $29.3 million of net foreign exchange gains from the
liquidation of certain international entities in fiscal years
2007, 2006 and 2005, respectively. Flextronics also recognized
$7.7 million and $7.6 million in executive separation
costs in fiscal years 2006 and 2005, respectively. Flextronics
recognized charges of $8.2 million and $7.4 million in
fiscal years 2005 and 2003, respectively, for the
other-than-temporary impairment of its investments in certain
non-publicly traded companies. In fiscal year 2006, Flextronics
recognized a net gain of $4.3 million related to its
investments in certain non-publicly traded companies. |
|
(3) |
|
Includes continuing and discontinued operations for the fiscal
years ended on and prior to March 31, 2006. |
19
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF SOLECTRON
The selected historical consolidated financial data in the table
below for the six months ended March 2, 2007 and
February 24, 2006 were derived from Solectrons
unaudited consolidated financial statements. The selected
historical consolidated financial data for each year in the five
fiscal year period ended August 25, 2006, were derived from
Solectrons audited consolidated financial statements. This
information should be read in conjunction with Solectrons
historical consolidated financial statements and related notes
and the sections entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations
contained in the annual and quarterly reports of Solectron and
in conjunction with the other information that Solectron has
filed with the SEC which have been incorporated by reference
into this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
For Twelve Months Ended
|
|
|
|
March 2,
|
|
|
February 24,
|
|
|
August 25,
|
|
|
August 26,
|
|
|
August 27,
|
|
|
August 29,
|
|
|
August 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In millions, except per share data)
|
|
|
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
5,901.0
|
|
|
$
|
4,956.0
|
|
|
$
|
10,560.7
|
|
|
$
|
10,441.1
|
|
|
$
|
11,638.3
|
|
|
$
|
9,828.3
|
|
|
$
|
10,738.7
|
|
Cost of sales
|
|
|
5,598.8
|
|
|
|
4,701.4
|
|
|
|
10,013.1
|
|
|
|
9,868.8
|
|
|
|
11,068.6
|
|
|
|
9,388.4
|
|
|
|
10,234.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
302.2
|
|
|
|
254.6
|
|
|
|
547.6
|
|
|
|
572.3
|
|
|
|
569.7
|
|
|
|
439.9
|
|
|
|
503.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
226.5
|
|
|
|
211.7
|
|
|
|
433.3
|
|
|
|
412.8
|
|
|
|
446.7
|
|
|
|
566.9
|
|
|
|
661.4
|
|
Restructuring and impairment
costs(1)
|
|
|
51.1
|
|
|
|
6.5
|
|
|
|
14.0
|
|
|
|
91.1
|
|
|
|
177.9
|
|
|
|
604.8
|
|
|
|
787.7
|
|
Goodwill impairment costs(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,620.1
|
|
|
|
2,500.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
24.6
|
|
|
|
36.4
|
|
|
|
100.3
|
|
|
|
68.4
|
|
|
|
(54.9
|
)
|
|
|
(2,351.9
|
)
|
|
|
(3,445.2
|
)
|
Interest and other income (expense)
|
|
|
2.4
|
|
|
|
10.8
|
|
|
|
16.8
|
|
|
|
(63.2
|
)
|
|
|
(210.8
|
)
|
|
|
(131.5
|
)
|
|
|
(74.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes
|
|
|
27.0
|
|
|
|
47.2
|
|
|
|
117.1
|
|
|
|
5.2
|
|
|
|
(265.7
|
)
|
|
|
(2,483.4
|
)
|
|
|
(3,519.3
|
)
|
Income tax expense (benefit)
|
|
|
4.8
|
|
|
|
9.9
|
|
|
|
(1.3
|
)
|
|
|
15.7
|
|
|
|
(3.3
|
)
|
|
|
525.5
|
|
|
|
(450.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
22.2
|
|
|
$
|
37.3
|
|
|
$
|
118.4
|
|
|
$
|
(10.5
|
)
|
|
$
|
(262.4
|
)
|
|
$
|
(3,008.9
|
)
|
|
$
|
(3,069.3
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
$
|
(0.9
|
)
|
|
$
|
17.1
|
|
|
$
|
15.6
|
|
|
$
|
16.8
|
|
|
$
|
93.7
|
|
|
$
|
(331.7
|
)
|
|
$
|
(59.1
|
)
|
Income tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.9
|
|
|
|
8.7
|
|
|
|
112.0
|
|
|
|
(18.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) on discontinued
operations
|
|
|
(0.9
|
)
|
|
|
17.1
|
|
|
|
15.6
|
|
|
|
13.9
|
|
|
|
85.0
|
|
|
|
(443.7
|
)
|
|
|
(40.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative
effect of change in accounting principle
|
|
|
21.3
|
|
|
|
54.4
|
|
|
|
134.0
|
|
|
|
3.4
|
|
|
|
(177.4
|
)
|
|
|
(3,452.6
|
)
|
|
|
(3,109.7
|
)
|
Cumulative effect of change in
accounting principle, net
|
|
|
|
|
|
|
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21.3
|
|
|
$
|
54.4
|
|
|
$
|
133.2
|
|
|
$
|
3.4
|
|
|
$
|
(177.4
|
)
|
|
$
|
(3,452.6
|
)
|
|
$
|
(3,109.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
For Twelve Months Ended
|
|
|
|
March 2,
|
|
|
February 24,
|
|
|
August 25,
|
|
|
August 26,
|
|
|
August 27,
|
|
|
August 29,
|
|
|
August 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In millions, except per share data)
|
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(3.63
|
)
|
|
$
|
(3.93
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
|
0.10
|
|
|
|
(0.54
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.15
|
|
|
$
|
0.00
|
|
|
$
|
(0.20
|
)
|
|
$
|
(4.17
|
)
|
|
$
|
(3.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
$
|
0.13
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(3.63
|
)
|
|
$
|
(3.93
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.02
|
|
|
|
0.02
|
|
|
|
0.01
|
|
|
|
0.10
|
|
|
|
(0.54
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.15
|
|
|
$
|
(0.00
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(4.17
|
)
|
|
$
|
(3.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 2,
|
|
|
February 24,
|
|
|
August 25,
|
|
|
August 26,
|
|
|
August 27,
|
|
|
August 29,
|
|
|
August 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In millions)
|
|
|
CONSOLIDATED BALANCE SHEET
DATA*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
2,078.8
|
|
|
$
|
2,009.6
|
|
|
$
|
2,047.5
|
|
|
$
|
2,009.4
|
|
|
$
|
2,476.8
|
|
|
$
|
1,696.6
|
|
|
$
|
3,652.8
|
|
Total assets
|
|
|
5,641.2
|
|
|
|
5,334.9
|
|
|
|
5,373.6
|
|
|
|
5,257.8
|
|
|
|
5,864.0
|
|
|
|
6,570.3
|
|
|
|
10,990.0
|
|
Long-term debt
|
|
|
616.0
|
|
|
|
628.0
|
|
|
|
619.4
|
|
|
|
540.9
|
|
|
|
1,221.4
|
|
|
|
1,816.9
|
|
|
|
3,180.2
|
|
Stockholders equity
|
|
|
2,448.2
|
|
|
|
2,353.1
|
|
|
|
2,413.7
|
|
|
|
2,444.2
|
|
|
|
2,418.9
|
|
|
|
1,471.7
|
|
|
|
4,771.4
|
|
|
|
|
* |
|
Continuing and discontinued operations |
|
(1) |
|
Restructuring and impairment costs consist of the following: |
|
|
|
For the six months ended March 2, 2007,
$43.8 million primarily related to severance, leased
facilities, impairment charges and other exit costs.
|
|
|
|
For the six months ended February 24, 2006,
represents fixed asset and intangible impairment and severance
charges.
|
|
|
|
For the twelve months ended August 25, 2006:
(a) $12.9 million of impairment charges resulting from
the impairment of certain long-lived assets,
(b) $1.9 million of charges related to intangible
assets, (c) $10.8 million reversal of restructuring
charges resulting from a reduction in severance provision, and
(d) a $10.0 million restructuring charge for
facilities and other exit costs.
|
|
|
|
For the twelve months ended August 26, 2005:
(a) $55.2 million of restructuring charges,
principally arising from the Fiscal Year 2005 Restructuring Plan
to consolidate facilities, reduce the workforce in Europe and
North America, and impair certain long-lived assets, and
(b) a $35.9 million impairment due to non-cash charges
in connection with the sale of a facility in Japan.
|
|
|
|
For the twelve months ended August 27, 2004:
(a) $130.4 million of restructuring charges and
(b) a $47.5 million impairment of an intangible asset
arising from the disengagement from certain product lines.
|
|
|
|
For the twelve months ended August 29, 2003:
(a) $433.1 million of restructuring charges and
(b) $171.7 million of impairment charges as the result
of reduced expectations of sales to be realized under certain
supply agreements.
|
|
|
|
For the twelve months ended August 30, 2002:
(a) $596.5 million of restructuring charges and
(b) $191.2 million of impairment charges as the result
of reduced expectations of sales to be realized under certain
supply agreements.
|
|
(2) |
|
Goodwill impairments of approximately $1.6 billion and
$2.5 billion were recorded in fiscal year 2003 and fiscal
year 2002, respectively, as a result of significant negative
industry and economic trends impacting Solectrons
operations and stock price. |
21
SELECTED
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The merger will be accounted for by Flextronics under the
purchase method of accounting, which means the assets and
liabilities of Solectron will be recorded, as of the completion
of the merger, at their respective fair values and added to
those of Flextronics. For a more detailed description of
purchase accounting, see the section entitled The
Merger Accounting Treatment of the Merger on
page 79 of this joint proxy statement/prospectus.
The following table shows information about the unaudited pro
forma financial condition and results of operations after giving
effect to the merger. The table sets forth selected unaudited
pro forma condensed combined statement of operations data as if
the merger had become effective on April 1, 2006, and
selected unaudited pro forma condensed combined balance sheet
data as if the merger had become effective on March 31,
2007. Flextronicss fiscal year ends on March 31 whereas
Solectrons financial reporting year ends on the last
Friday in August. In order to prepare the selected unaudited pro
forma condensed combined statement of operations for the year
ended March 31, 2007, Solectrons operating results
have been aligned to more closely conform to those of
Flextronics. Solectrons statement of operations have been
adjusted to present its results of operations for the twelve
months ended March 2, 2007 by adding its interim period
results for the six-months ended March 2, 2007 to its
results of operations for the year ended August 25, 2006,
and subtracting the comparable preceding year interim period
results. In addition, certain reclassifications have been made
as pro forma adjustments to Solectrons historical
financial statements to conform to the presentation used in
Flextronicss historical financial statements. Such
reclassifications had no effect on Solectrons previously
reported results of operations.
The information presented below should be read together with the
historical consolidated financial statements of Flextronics and
Solectron, including the related notes, filed by each of them
with the SEC and incorporated herein by reference, together with
the summary selected consolidated historical financial data for
Flextronics and Solectron and the other unaudited pro forma
financial information, including the related notes, appearing
elsewhere in this joint proxy statement/prospectus. See the
sections entitled Where You Can Find More
Information beginning on page 183 of this joint proxy
statement/prospectus and Unaudited Pro Forma Condensed
Combined Financial Information beginning on page 111
of this joint proxy statement/prospectus. The unaudited pro
forma financial data are not necessarily indicative of results
that actually would have occurred had the merger been completed
on the dates indicated or that may be attained in the future.
See the sections entitled Risk Factors beginning on
page 26 of this joint proxy statement/prospectus and
Cautionary Statement Regarding Forward-Looking
Information beginning on page 25 of this joint proxy
statement/prospectus.
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2007
|
|
|
|
(In thousands, except
|
|
|
|
per share amounts)
|
|
|
PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS DATA(1):
|
|
|
|
|
Net sales
|
|
$
|
30,094,061
|
|
Cost of sales
|
|
|
28,416,872
|
|
Restructuring charges
|
|
|
203,492
|
|
|
|
|
|
|
Gross profit
|
|
|
1,473,697
|
|
Selling, general and
administrative expenses
|
|
|
990,248
|
|
Intangible amortization
|
|
|
69,890
|
|
Restructuring charges
|
|
|
6,965
|
|
Other income, net
|
|
|
(77,594
|
)
|
Interest and other expense, net
|
|
|
223,502
|
|
|
|
|
|
|
Income from continuing operations
before income taxes
|
|
|
260,686
|
|
Benefit from income taxes
|
|
|
(15,139
|
)
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
275,825
|
|
Diluted earnings per share:
|
|
$
|
0.36
|
|
22
|
|
|
|
|
|
|
As of March 31, 2007
|
|
|
|
(In thousands)
|
|
|
PRO FORMA CONDENSED COMBINED
BALANCE SHEET DATA(1):
|
|
|
|
|
Working capital
|
|
$
|
3,156,468
|
|
Total assets
|
|
|
19,365,973
|
|
Total long-term debt and capital
lease obligations, excluding current portion
|
|
|
3,993,439
|
|
Shareholders equity
|
|
|
8,001,934
|
|
|
|
|
(1) |
|
In preparing the unaudited pro forma condensed combined
financial statements, Flextronics has assumed that holders of
50% of Solectrons common stock outstanding immediately
prior to the closing of the merger will elect to receive new
Flextronics ordinary shares at the exchange ratio of 0.3450 of a
Flextronics ordinary share for each share of Solectron common
stock, and holders of 50% of Solectrons common stock
outstanding immediately prior to the closing of the merger will
elect to receive cash consideration in the amount of $3.89 per
share of Solectron common stock as stated in the merger
agreement. Flextronics is continuing to evaluate its existing
cash positions and financing agreements, and alternative
long-term financing arrangements to fund the cash requirements
for this transaction (including the refinancing of
Solectrons debt if required). For the purposes of
preparing the unaudited pro forma condensed combined financial
statements, Flextronics estimates that it will borrow
approximately $1.9 billion in connection with financing the
cash consideration attributable to the acquisition (including
costs associated with the transaction). Depending on the actual
number of Solectron shares outstanding as of the acquisition
date and the percentage of Solectron stockholders that elect to
receive Flextronics ordinary shares, the cash paid, amount
borrowed and Flextronics ordinary shares issued may differ
significantly from the information in the unaudited pro forma
condensed combined financial statements. For example, had
Flextronics assumed that 70% of the holders of Solectron common
stock outstanding immediately prior to the closing of the merger
would elect to receive Flextronics ordinary shares and 30% of
the holders of Solectron common stock outstanding immediately
prior to the closing of the merger would elect to receive cash
consideration, Flextronics estimates that it would borrow
approximately $700 million less at an estimated interest
rate of 7.3% resulting in less interest expense, a corresponding
increase in the combined companys equity on a pro forma
basis, and basic and diluted weighted average shares outstanding
would be approximately 64 million shares higher on a pro
forma basis. The impact on total purchase price and pro forma
assets of the combined company is not material. |
23
COMPARATIVE
HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth certain historical and pro forma
combined per share data of Flextronics and Solectron and certain
pro forma equivalent Solectron per share data. The information
set forth below is only a summary and should be read in
conjunction with selected historical consolidated financial data
and selected unaudited pro forma condensed combined financial
data contained elsewhere in this joint proxy
statement/prospectus and the respective audited and unaudited
financial statements and related notes of Flextronics and
Solectron that are incorporated by reference into this joint
proxy statement/prospectus. Neither Flextronics nor Solectron
has declared or paid cash dividends in the last five years.
|
|
|
|
|
Historical Flextronics Per
Share Data
|
|
|
|
|
Income per diluted share from
continuing operations:
|
|
|
|
|
For the twelve months ended
March 31, 2007
|
|
$
|
0.54
|
|
Book value per share(1):
|
|
|
|
|
As of March 31, 2007
|
|
$
|
10.17
|
|
Historical Solectron Per Share
Data
|
|
|
|
|
Income per diluted share from
continuing operations:
|
|
|
|
|
For the twelve months ended
August 25, 2006
|
|
$
|
0.13
|
|
For the six months ended
March 2, 2007
|
|
$
|
0.02
|
|
Book value per share(1):
|
|
|
|
|
As of August 25, 2006
|
|
$
|
2.66
|
|
As of March 2, 2007
|
|
$
|
2.70
|
|
Unaudited Pro Forma Condensed
Combined Comparative Per Share Data
|
|
|
|
|
Income per diluted share from
continuing operations:
|
|
|
|
|
For the twelve months ended
March 31, 2007
|
|
$
|
0.36
|
|
Book value per share(1):
|
|
|
|
|
As of March 31, 2007
|
|
$
|
10.44
|
|
Unaudited Pro Forma Equivalent
Per Share Data for Solectron(2)
|
|
|
|
|
Income per diluted share from
continuing operations:
|
|
|
|
|
For the twelve months ended
March 31, 2007
|
|
$
|
0.12
|
|
Book value per share(1):
|
|
|
|
|
As of March 31, 2007
|
|
$
|
3.60
|
|
|
|
|
(1) |
|
Historical book value per share is computed by dividing total
stockholders equity by the number of shares outstanding at
the end of each period. The unaudited pro forma book value per
share is computed by dividing total pro forma stockholders
equity by the sum of the number of Flextronics ordinary shares
outstanding at the end of the period and the number of
Flextronics ordinary shares expected to be issued in the merger
assuming 50% of the holders of Solectron common stock (including
restricted shares and exchangeable shares) will elect to receive
new Flextronics shares at the exchange ratio of 0.3450. |
|
(2) |
|
The unaudited pro forma equivalent per share data was calculated
by multiplying the share exchange ratio of 0.3450 to the pro
forma income per diluted share from continuing operations and
pro forma book value per share, respectively. |
24
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This joint proxy statement/prospectus (including information
incorporated by reference herein) contains forward-looking
statements within the meaning of federal securities laws
relating to both Flextronics and Solectron. These
forward-looking statements include statements related to the
expected closing of the acquisition of Solectron by Flextronics,
the expected synergies and benefits to the combined company and
its customers from the acquisition, the ability of the
acquisition to enable the combined company to capture new
customers and expand relationships with existing customers, the
impact of the acquisition on Flextronicss earnings, the
ability of Flextronics to successfully integrate
Solectrons business operations and employees, and
potential difficulties or delays in obtaining regulatory or
shareholder approvals for the proposed transaction. The results
described in these forward-looking statements are subject to
risks and uncertainties that could cause actual results to
differ materially from those anticipated by the forward-looking
statements, including, without limitation:
|
|
|
|
|
the acquisition may not be completed as planned or at all;
|
|
|
|
Solectron may not be successfully integrated into
Flextronicss operations;
|
|
|
|
the revenues, cost savings, growth prospects and any other
synergies expected from the proposed transaction may not be
fully realized or may take longer to realize than expected;
|
|
|
|
growth in the EMS business may not occur as expected or at all;
|
|
|
|
production difficulties may be encountered with Solectrons
or Flextronicss products;
|
|
|
|
Flextronics and Solectron depend on industries that continually
produce technologically advanced products with short life
cycles, which results in short-term customer commitments and
fluctuations in demand for customers products; and
|
|
|
|
the increased indebtedness resulting from the proposed
transaction could limit the flexibility of the combined company,
and possibly limit the combined companys business strategy
or its ability to access additional capital.
|
Other risks affecting the combined company are described in the
section entitled Risk Factors on page 26 as
well as those described in the reports on
Form 10-K,
Form 10-Q
and
Form 8-K
filed by Flextronics and by Solectron with the SEC. The
forward-looking statements in this joint proxy
statement/prospectus (including information incorporated by
reference herein) are based on current expectations and neither
Flextronics nor Solectron assumes any obligation to update these
forward-looking statements.
25
RISK
FACTORS
In addition to the other information included in or
incorporated by reference into this joint proxy
statement/prospectus, you should carefully read and consider the
following material risks relating to the merger, and the
business of the combined company before deciding whether to vote
in favor of the proposal to adopt the merger agreement or to
vote in favor of the proposal to authorize the issuance of
Flextronics ordinary shares in the merger, as the case may be.
You should also read and consider the risks associated with each
of the businesses of Flextronics and Solectron because these
risks will affect the combined company. These risks can be found
in Flextronicss Annual Report on
Form 10-K
for the fiscal year ended March 31, 2007, Solectrons
Quarterly Report on
Form 10-Q
for the quarter ended March 2, 2007 and in subsequent
annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K,
which are filed by Flextronics and Solectron with the SEC and
incorporated by reference into this document.
Risks
Relating to the Merger
Because
the market price of Flextronics ordinary shares will fluctuate,
Solectron stockholders cannot be certain of the value of the
merger consideration that they will receive in the
merger.
If the merger is consummated, a maximum of 70% and no less than
50% of the Solectron common stock outstanding immediately prior
to the closing of the merger will be converted into Flextronics
ordinary shares. The exchange ratio at which each share of
Solectron common stock will be converted into Flextronics
ordinary shares is fixed at 0.3450 of a Flextronics ordinary
share and will not be adjusted in the event that the price of
either Flextronics ordinary shares or Solectron common stock
increases or decreases prior to the closing of the merger. In
addition, Solectron stockholders will have to make their
election for cash or Flextronics ordinary shares by the later of
the date of the Solectron special meeting and approximately ten
business days prior to the expected completion of the merger.
Further, obtaining required regulatory clearances and approvals
and a number of other conditions beyond the control of
Flextronics and Solectron may cause a substantial delay between
the time of the Solectron special meeting and Flextronics annual
general meeting and the completion of the merger.
The market value of Flextronics ordinary shares is likely to
vary following the date of this joint proxy
statement/prospectus, and prior to the date Solectrons
stockholders vote to adopt the merger agreement and
Flextronicss shareholders vote to authorize the issuance
of Flextronics ordinary shares in the merger. In addition, the
market value of Flextronics ordinary shares is likely to vary
following the last date by which Solectrons stockholders
must elect whether to receive cash consideration or Flextronics
ordinary shares, and prior to the date the merger is completed.
The market value of Flextronics ordinary shares is likely to
vary due to a variety of factors, including economic, business,
competitive, market and regulatory conditions, or changes in the
operations or prospects of Flextronics or Solectron. The value
of the Flextronics ordinary shares to be received by Solectron
stockholders in the merger will go up or down with any such
fluctuations in the value of Flextronics ordinary shares prior
to the completion of the merger. If the market price of
Flextronics ordinary shares decreases, the value of Flextronics
ordinary shares issued in the merger would decrease from the
value of such shares on the date Solectrons stockholders
approved the merger agreement. Conversely, if the market price
of the Flextronics ordinary shares issued upon completion of the
merger increases, the value of the Flextronics ordinary shares
issued to Solectron stockholders in the merger would be higher
than the value of those shares on the date Flextronicss
shareholders approved the issuance of Flextronics ordinary
shares at the Flextronics annual general meeting. In addition,
Solectron stockholders will not know the relative value of the
Flextronics ordinary shares to be issued in the merger at the
time the Solectron stockholders make their election for either
cash or Flextronics ordinary shares. After the merger, the
market value of Flextronics ordinary shares will continue to
fluctuate over time due to economic, business, competitive,
market and regulatory factors.
Ownership
of Flextronics ordinary shares may involve different risks than
those affecting Solectron common stock.
Upon consummation of the merger, holders of Solectron common
stock that receive Flextronics ordinary shares in the merger may
be subject to different risks than they faced as Solectron
stockholders. Flextronicss business differs from that of
Solectrons and an investment in the combined company will
expose Solectrons
26
former stockholders to risks that are unique to
Flextronicss business. These risks are described in the
documents that Flextronics files with the SEC that are
incorporated by reference into this joint proxy
statement/prospectus and referred to in the section entitled
Where You Can Find More Information beginning on
page 183 of this joint proxy statement/prospectus.
In addition, there are numerous differences between the rights
of a stockholder of Solectron, a Delaware corporation, and the
rights of a shareholder of Flextronics, a Singapore company. For
a detailed discussion of these differences, see the section
entitled Comparison of Rights of Holders of Solectron
Common Stock and Holders of Flextronics Ordinary Shares
beginning on page 124 of this joint proxy
statement/prospectus.
Solectron
stockholders will have less of an ability to influence
Flextronicss actions and decisions following the merger
than they did with respect to Solectrons
business.
Upon the consummation of the merger, former Solectron
stockholders will not hold a majority of the then outstanding
Flextronics ordinary shares. For example, if the merger was
consummated on the record date for the Solectron special
meeting, and assuming that the former Solectron stockholders
holding 70% of the outstanding shares of Solectron common stock
elect to receive Flextronics ordinary shares as merger
consideration, former Solectron stockholders would hold in the
aggregate approximately % of the
outstanding Flextronics ordinary shares (based on the number of
shares of Flextronics and Solectron outstanding as of the record
date, including Solectron restricted shares and the exchangeable
shares). Former Solectron stockholders will not have separate
approval rights with respect to any actions or decisions of
Flextronics. As a result, Solectron stockholders will have less
of an ability to influence Flextronicss business than they
did with respect to Solectrons business.
Solectron
stockholders may receive a form or combination of consideration
that differs from what they have elected to
receive.
Although each Solectron stockholder may elect to receive either
all cash or all Flextronics ordinary shares in the merger, the
merger agreement provides that, regardless of the elections made
by Solectron stockholders, at least 50% but no more than 70% of
Solectrons outstanding shares of common stock (including
the outstanding exchangeable shares) will be converted into
Flextronics ordinary shares, and at least 30% but no more than
50% of Solectrons outstanding shares of common stock
(including the outstanding exchangeable shares) will be
converted into cash. As a result, the cash and stock elections
made by Solectron stockholders will be subject to proration if
either of these limits is exceeded, and Solectron stockholders
that have elected to receive either cash or Flextronics ordinary
shares could in certain circumstances receive a combination of
both cash and Flextronics ordinary shares. In addition, if a
Solectron stockholder fails to submit a properly completed and
signed election form to the exchange agent by the election
deadline, that stockholder will be unable to choose the type of
merger consideration received, and, consequently, the
stockholder may receive only cash, only Flextronics ordinary
shares, or a combination of cash and Flextronics ordinary shares
in the merger. Depending on each Solectron stockholders
circumstances, there could be significant differences in the tax
treatment of the different forms of consideration received by
Solectron stockholders in the merger. See the sections entitled
The Merger Agreement Election of Merger
Consideration beginning on page 88 of this joint
proxy statement/prospectus and The Merger
Material U.S. Federal Income Tax Consequences of the
Merger beginning on page 75 of this joint proxy
statement/prospectus.
The
directors and executive officers of Solectron have interests and
arrangements that could affect their decision to support or
approve the merger.
When considering the Solectron board of directors
recommendation that Solectron stockholders vote in favor of the
proposal to adopt the merger agreement, Solectrons
stockholders should be aware that Solectrons directors and
executive officers may have interests in the merger that differ
from, or which are in addition to, the interests of Solectron
stockholders. These interests create a potential conflict of
interest and may be perceived to have affected their decision to
support or approve the merger. The Solectron board of directors
was aware of these potential conflicts of interest during its
deliberations on the merits of the merger and in making its
decisions in approving the merger agreement, the merger and the
related transactions. These interests include possible continued
employment of certain executive officers of Solectron by the
combined company, the continuation of indemnification rights and
coverage under existing or new directors and
officers liability insurance policies, accelerated vesting
of stock
27
awards to executive officers and directors and the receipt of
other benefits, including accelerated vesting of amounts
contributed to the accounts of executive officers in the
Solectron Executive Deferred Compensation Plan, that would be
triggered by certain terminations on or following the
consummation of the merger. Solectron stockholders should be
aware of these interests when considering the Solectron board of
directors recommendation to adopt the merger agreement.
See the section entitled The Merger Interests
of Solectrons Officers and Directors in the Merger
beginning on page 67 of this joint proxy
statement/prospectus.
If the
merger does not qualify as a tax-free reorganization for U.S.
federal income tax purposes, Solectron stockholders will
recognize gain or loss on the exchange of Solectron common stock
for Flextronics ordinary shares.
Although the Internal Revenue Service, or the IRS, has not
provided and will not provide a ruling on the merger,
Flextronics and Solectron each will seek to obtain a legal
opinion from their respective tax counsel that the planned
two-step merger will qualify as a tax-free reorganization under
Section 368(a) of the Code. These opinions, if delivered,
would neither bind the IRS nor prevent the IRS from adopting a
contrary position. If either Flextronicss counsel or
Solectrons counsel is unable to deliver such a legal
opinion, then either Flextronics or Solectron may waive such
condition unilaterally on behalf of all parties and the planned
two-step merger will not be consummated. Instead, the
transaction will proceed as a single-step merger where Saturn
Merger Corp. will be merged with and into Solectron, with
Solectron continuing as the surviving corporation and a
wholly-owned subsidiary of Flextronics, a transaction that
generally would not qualify as a tax-free reorganization under
Section 368(a) of the Code. If the merger does not qualify
as a tax-free reorganization under Section 368(a) of the
Code for any reason, Solectron stockholders generally would
recognize gain or loss on the shares of Solectron common stock
surrendered in the merger in the amount of the difference
between the basis in such shares and the sum of the amount of
cash and the fair market value of the Flextronics ordinary
shares received in exchange for such shares of Solectron common
stock. If counsel for either Flextronics or Solectron is unable
to deliver the required opinion, either Flextronics or
Solectron, without needing the consent of the other party, could
decide to proceed with a single-step merger that does not
qualify as a tax-free reorganization under Section 368(a)
of the Code. That decision could be made after the date of the
Solectron special meeting and Solectron stockholders would not
have the opportunity to consider that decision when determining
whether to adopt the merger agreement at the Solectron special
meeting. For a more complete description of the material
U.S. federal income tax consequences of the merger, see the
section entitled The Merger Material
U.S. Federal Income Tax Consequences of the Merger
beginning on page 75 of this joint proxy
statement/prospectus.
Flextronics
and Solectron may be unable to obtain the regulatory approvals
required to complete the merger; delays or restrictions imposed
by competition authorities could harm the combined
companys operations.
Flextronics and Solectron may be unable to obtain the regulatory
approvals required to complete the transaction in the time
period forecasted, if at all. In order to complete the merger,
Flextronics and Solectron must notify, furnish information to,
and, where applicable, obtain clearance from competition
authorities in Brazil, Canada, China, the European Commission,
Mexico, Turkey and Ukraine. Flextronics and Solectron will also
notify and furnish information to, on a voluntary basis, the
competition authorities in Singapore. The merger is also subject
to U.S. antitrust laws and, as such, is subject to review
by the Antitrust Division of the United States Department of
Justice, or the DOJ, and the Federal Trade Commission, or the
FTC, under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or the HSR Act.
Flextronics and Solectron made their filings under the HSR Act
on June 14, 2007, and have made the necessary filings with
competition authorities in Brazil on June 26, 2007, in
Canada on July 6, 2007, in Mexico on July 6, 2007, in
Turkey on July 3, 2007 and in Ukraine on July 6, 2007.
Flextronics and Solectron have informally notified the
competition authorities in China, Mexico and the European
Commission of the merger and expect to file formal notifications
of the merger in China, the European Commission, Mexico and
Singapore in mid-July 2007. Reviewing agencies or governments or
private persons may challenge the merger under antitrust or
similar laws at any time before or after its completion. Any
resulting delay in the completion of the merger could diminish
the anticipated benefits of the merger or result in additional
transaction costs, loss of revenue or other effects associated
with uncertainty about the transaction.
28
The reviewing authorities may not permit the merger at all or
may impose restrictions or conditions on the merger that may
seriously harm the combined company if the merger is completed.
These conditions could include a complete or partial license,
divestiture, spin-off or the holding separate of assets or
businesses. Pursuant to the terms of the merger agreement,
Flextronics is not required to agree to any divestiture of any
shares of capital stock or of any business, assets or properties
of Flextronics or its subsidiaries or affiliates (including
Solectron or its subsidiaries) that will have or would
reasonably be expected to have a material adverse effect on the
benefits expected to be derived from the merger. In addition,
Flextronics may refuse to complete the merger if governmental
authorities impose any material restrictions or limitations on
Flextronics, Solectron or their respective subsidiaries and
their ability to conduct their respective businesses that will
have or would reasonably be expected to have a material adverse
effect on the benefits expected to be derived from the merger.
Flextronics and Solectron also may agree to restrictions or
conditions imposed by antitrust authorities in order to obtain
regulatory approval, and these restrictions or conditions could
harm the combined companys operations.
Any
delay in completing the merger may significantly reduce the
benefits expected to be obtained from the merger.
In addition to receipt of required regulatory clearances and
approvals, the merger is subject to a number of other conditions
beyond the control of Flextronics and Solectron that may
prevent, delay or otherwise materially adversely affect its
completion. See the section entitled The Merger Agreement
Conditions to Completion of the Merger
beginning on page 104 of this joint proxy
statement/prospectus. Flextronics and Solectron cannot predict
whether and when these other conditions will be satisfied.
Further, the requirements for obtaining the required clearances
and approvals could delay the completion of the merger for a
significant period of time or prevent it from occurring. Any
delay in completing the merger may affect the ability of
Flextronics and Solectron to achieve the synergies and other
benefits they expect to achieve from the merger within the
forecasted timeframe.
Failure
to complete the merger could materially and adversely affect
Solectrons and Flextronicss results of operations
and respective stock prices.
Consummation of the merger is subject to customary closing
conditions, including obtaining the approval of Solectrons
stockholders and Flextronics shareholders to proposals that are
described in this joint proxy statement/prospectus. There can be
no assurance that these conditions will be met or waived, that
the necessary approvals will be obtained, or that Flextronics
and Solectron will be able to successfully consummate the merger
as currently contemplated under the merger agreement or at all.
In addition, on June 4, 2007, a purported class action complaint
was filed in the Superior Court of the State of California,
County of Santa Clara, alleging breach of fiduciary duty of
the directors of Solectron and seeking to enjoin the merger. See
the section entitled The Merger Legal
Proceedings Relating to the Merger beginning on
page 81 of this joint proxy statement/prospectus.
If the merger is not consummated:
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Flextronics and Solectron will remain liable for significant
transaction costs, including legal, accounting, financial
advisory and other costs relating to the merger;
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under specified circumstances, Solectron may have to pay a
termination fee in the amount of $100.0 million to
Flextronics or Flextronics may have to pay a termination fee in
the amount of $100.0 million to Solectron (see the section
entitled The Merger Agreement Termination of
the Merger Agreement and Termination Fees beginning on
page 106 of this joint proxy statement/prospectus);
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any operational investments that Flextronics and Solectron may
delay due to the pending transaction would need to be made,
potentially on an accelerated timeframe, which could then prove
costly and more difficult to implement; and
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the market price of Solectron common stock may decline to the
extent that the current market price reflects a belief by
investors that the merger will be completed.
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Additionally, the announcement of the pending merger may lead to
uncertainty for Flextronics and Solectrons employees and
some of Flextronics and Solectrons customers and suppliers.
29
This uncertainty may mean:
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the attention of Flextronicss and Solectrons
management and employees may be diverted from day-to-day
operations;
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Flextronicss and Solectrons customers and suppliers
may seek to modify or terminate existing agreements, or
prospective customers may delay entering into new agreements or
purchasing Solectrons products as a result of the
announcement of the merger; and
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Flextronicss and Solectrons ability to attract new
employees and retain existing employees may be harmed by
uncertainties associated with the merger.
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The occurrence of any of these events individually or in
combination could materially and adversely affect Flextronics
and Solectrons results of operations and their respective
stock prices.
The
termination fee and the restrictions on solicitation contained
in the merger agreement may discourage other companies from
trying to acquire Solectron.
Until the completion of the merger (with some exceptions),
Solectron is prohibited from initiating or engaging in
discussions with third parties regarding some types of
extraordinary transactions, such as a merger, business
combination or sale of a material amount of assets or capital
stock. In addition, Solectron has agreed to pay a termination
fee in the amount of $100.0 million to Flextronics under
specified circumstances described more fully in the section
entitled The Merger Agreement Termination of
the Merger Agreement and Termination Fees beginning on
page 106 of this joint proxy statement/prospectus. These
provisions could discourage other companies from trying to
acquire Solectron even though those other companies might be
willing to offer greater value to Solectron stockholders than
Flextronics has offered in the merger.
The
termination fee contained in the merger agreement may discourage
other companies from trying to acquire
Flextronics.
Flextronics has agreed to pay a termination fee in the amount of
$100.0 million to Solectron in connection with a
third-party acquisition of Flextronics under specified
circumstances described more fully in the section entitled
The Merger Agreement Termination of the Merger
Agreement and Termination Fees beginning on page 106
of this joint proxy statement/prospectus. This termination fee
could discourage other companies from trying to acquire
Flextronics, even though those other companies might be willing
to offer greater value to Flextronics shareholders than
Flextronics could realize through effecting the merger.
Flextronics
and Solectron are subject to contractual obligations while the
merger is pending that could restrict the manner in which they
operate their respective businesses.
The merger agreement restricts Solectron from making certain
acquisitions and taking other specified actions without the
consent of Flextronics until the merger occurs. The merger
agreement also restricts Flextronics from taking certain
specified actions without the consent of Solectron until the
merger occurs. These restrictions may prevent Flextronics
and/or
Solectron from pursuing business opportunities that may arise
prior to the completion of the merger. Please see the sections
entitled The Merger Agreement Solectrons
Conduct of Business Before Completion of the Merger
beginning on page 91 of this joint proxy
statement/prospectus and The Merger Agreement
Flextronicss Conduct of Business Before Completion of the
Merger beginning on page 94 of this joint proxy
statement/prospectus for a description of these restrictions.
The
failure of Solectron to obtain certain consents related to the
merger could give third parties the right to terminate or alter
existing contracts, declare a default under existing contracts,
or otherwise result in liabilities of the combined company to
third parties.
Certain agreements between Solectron and its lenders, suppliers,
customers or other business partners require the consent or
approval of these other parties in connection with the merger.
Solectron has agreed to use reasonable best efforts to secure
any necessary consents and approvals requested by Flextronics.
However, Solectron may not be successful in obtaining all
necessary consents or approvals, or if the necessary consents
are obtained, they may
30
not be obtained on favorable terms. If these consents and
approvals are not obtained, the failure to have obtained such
consents or approvals could give third parties the right to
terminate or alter existing contracts, declare a default under
existing contracts, demand payment on outstanding obligations or
result in some other liability of the combined company to such
third parties, which in each instance could have a material
adverse effect on the business and financial condition of the
combined company after the merger.
Flextronics
and Solectron expect to incur significant costs associated with
the merger.
Flextronics and Solectron expect to incur significant costs
associated with completing the merger. Flextronics believes that
it may incur charges to operations, which are not currently
reasonably estimable, in the quarter in which the merger is
completed or the following quarters, to reflect costs associated
with integrating the businesses and operations of Flextronics
and Solectron. There can be no assurance that Flextronics will
not incur additional charges in subsequent quarters to reflect
additional costs associated with the merger.
Risks
Relating to the Combined Company Following the Merger
Flextronics
may not realize the expected benefits of the merger due to
difficulties integrating the businesses, operations and product
lines of Flextronics and Solectron.
Flextronics believes that the acquisition of Solectron will
result in certain benefits, including certain cost and operating
synergies and operational efficiencies. However,
Flextronicss ability to realize these anticipated benefits
will depend on a successful combination of the businesses of
Flextronics and Solectron. The integration process will be
complex, time-consuming and expensive and could disrupt
Flextronicss business if not completed in a timely and
efficient manner. The combined company may not realize the
expected benefits of the merger for a variety of reasons,
including but not limited to the following:
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failure to demonstrate to Flextronicss and
Solectrons customers and suppliers that the merger will
not result in adverse changes in client service standards or
business focus;
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difficulties integrating IT and financial reporting systems;
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failure to rationalize and integrate facilities quickly and
effectively;
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loss of key employees during the transition and integration
periods;
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revenue attrition in excess of anticipated levels; and
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failure to leverage the increased scale of the combined company
quickly and effectively.
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Uncertainties
associated with the merger may cause a loss of employees and may
otherwise materially adversely affect the businesses of
Flextronics and Solectron, and the future business and
operations of the combined company.
The combined companys success after the merger will depend
in part upon the ability of the combined company to retain key
employees of Flextronics and Solectron. Current and prospective
employees of Flextronics and Solectron may be uncertain about
their roles with the combined company following the merger,
which may have a material adverse affect on the ability of each
of Flextronics and Solectron to attract and retain key
management, sales, marketing, technical and other personnel. In
addition, key employees may depart because of issues relating to
the uncertainty and difficulty of integration or a desire not to
remain with the combined company following the merger. The loss
of services of any key personnel or the inability to hire new
personnel with the requisite skills could restrict the ability
of the combined company to develop new products or enhance
existing products in a timely matter, to sell products to
customers or to manage the business of the combined company
effectively.
The
combined companys increased debt may create
limitations.
Flextronics estimates that it will require up to approximately
$1.9 billion to pay the cash portion of the merger
consideration, including acquisition and financing related
costs, assuming holders of 50% of Solectrons
31
outstanding shares elect to receive cash or approximately
$700 million less if holders of 30% of Solectrons
outstanding shares elect to receive cash. In addition, upon
consummation of the merger, the surviving corporation will be
required to offer to repurchase Solectrons outstanding
$150 million in 8.00% Senior Subordinated Notes due
2016 and $450 million in 0.5% Convertible Senior Notes
due 2034 at a price of 101% and 100%, respectively, of the
principal amount of the notes outstanding, plus accrued and
unpaid interest up to, but excluding, the date of repurchase.
Following the acquisition, the combined company is expected to
have approximately $3.3 billion (assuming 70% of
Solectrons outstanding shares elect to receive Flextronics
ordinary shares) to $4.0 billion (assuming 50% of
Solectrons outstanding shares elect to receive cash) in
total debt outstanding, and a higher debt to capital ratio than
that of Flextronics on a stand-alone basis. This increased
indebtedness could limit the combined companys flexibility
as a result of debt service requirements and restrictive
covenants, and may limit the combined companys ability to
access additional capital or execute its business strategy.
Acquisitions
or investments could disrupt the combined companys
business, harm its financial condition and potentially dilute
the ownership of its stockholders.
Each of Flextronics and Solectron has made, and the combined
company may continue to make, acquisitions in order to enhance
its business. Acquisitions involve numerous risks, including
problems combining the purchased operations, technologies or
products, unanticipated costs, diversion of managements
attention from its core businesses, adverse effects on existing
business relationships with suppliers and customers, risks
associated with entering markets in which the combined company
has no or limited prior experience and potential loss of key
employees. The integration of acquired businesses has been, and
will continue to be, a complex, time-consuming and expensive
process. There can be no assurance that the combined company
will be able to successfully integrate all of the businesses,
products, technologies or personnel that it might acquire,
including those acquired upon completion of the merger. If the
information and communication systems, operating procedures,
financial controls and human resources practices used by the
combined company are not quickly and efficiently adopted by
acquired businesses, the business and financial condition of the
combined company may be adversely affected.
Flextronics and Solectron have also made investments in order to
enhance their business and the combined company may in the
future also make investments in complementary companies,
products or technologies. In connection with any such
investments or acquisitions, the combined company could issue
stock that would dilute its then current stockholders
percentage ownership, incur debt, assume liabilities, incur
amortization expenses related to purchases of intangible assets,
or incur large and immediate write-offs.
If the
combined company does not successfully anticipate market needs
and develop products and product enhancements that meet those
needs, or if those products do not gain market acceptance, the
combined company may not be able to compete effectively and its
ability to generate revenues will suffer.
The combined company cannot ensure that it will be able to
anticipate future market needs or be able to develop new
products or product enhancements to meet such needs or to meet
them in a timely manner. If the combined company fails to
anticipate the market requirements or to develop new products or
product enhancements to meet those needs, such failure could
substantially decrease market acceptance and sales of its
present and future products, which would significantly harm its
business and financial results. Even if the combined company is
able to anticipate future market needs and develop and
commercially introduce new products and enhancements to meet
those needs, there can be no assurance that new products or
enhancements will achieve widespread market acceptance. Any
failure of the combined companys products to achieve
market acceptance could adversely affect its business and
financial results.
The
combined companys products may contain
defects.
The products of Flextronics, Solectron and the combined company
may contain undetected defects, errors or failures. These
products can only be fully tested when deployed in commercial
applications and other equipment.
32
Consequently, customers may discover errors after the products
have been deployed. The occurrence of any defects, errors or
failures could result in:
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cancellation of orders;
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product returns, repairs or replacements;
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diversion of resources of the combined company;
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legal actions by customers or customers end users;
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increased insurance costs; and
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other losses to the combined company or to customers or end
users.
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Any of these occurrences could also result in the loss of or
delay in market acceptance of products and loss of sales, which
could negatively affect the business and results of operations
of the combined company. As the combined companys products
become even more complex in the future, this risk may intensify
over time and may result in increased expenses.
If the
combined companys new product development and expansion
efforts are not successful, results of operations may be
adversely affected.
Each of Flextronics and Solectron is currently developing, and
Flextronics expects that the combined company will continue to
develop, products in new areas and the combined company may seek
to expand into additional areas in the future. The efforts of
the combined company to develop products and expand into new
areas may not result in sales that are sufficient to recoup its
investment, and it may experience higher costs than anticipated.
For example, the combined company may not be able to manufacture
products at a competitive cost, may need to rely on new
suppliers or may find that the development efforts are more
costly or time consuming than anticipated. Development of new
products often requires long-term forecasting of market trends,
development and implementation of new or changing technologies
and a substantial capital commitment. There can be no assurance
that the products that the combined company selects for
investment of its financial and engineering resources will be
developed or acquired in a timely manner or will enjoy market
acceptance. In addition, the combined companys products
may support protocols that are not widely adopted and it may
have difficulties entering markets where competitors have strong
market positions.
Both
Flextronicss and Solectrons quarterly results are
inherently unpredictable and subject to substantial fluctuations
and, as a result, the combined company may fail to meet the
expectations of securities analysts and investors, which could
adversely affect the trading price of its common
stock.
The combined companys revenues and operating results may
vary significantly from quarter to quarter due to a number of
factors, many of which are outside of its control and any of
which may cause its stock price to fluctuate.
The factors that may impact the unpredictability of its
quarterly results include limited visibility into
customers spending plans, changing market conditions,
including bankruptcies and similar negatives conditions and
events affecting customers and potential customers, a change in
the mix of customers products, and sales and
implementation cycles.
As a result, Flextronics and Solectron each believe that
quarter-to-quarter comparisons of their respective operating
results are not necessarily a good indication of what the
combined companys future performance will be. It is likely
that in some future quarters, operating results of the combined
company may be below the expectations of securities analysts and
investors in which case the price of Flextronics ordinary shares
may decline.
The
combined company may face uncertainties related to the
effectiveness of internal controls.
Public companies in the United States are required to review
their internal controls over financial reporting under
Section 404 of the Sarbanes-Oxley Act of 2002. Any system
of controls over financial reporting, no matter how well
designed and operated, can provide only reasonable, and not
absolute, assurance that the objectives of the system are met;
however, the design of any control system is based in part upon
certain assumptions about the
33
likelihood of future events. Because of these and other inherent
limitations of control systems, there can be no assurance that
any design will achieve its stated goal under all potential
future conditions, regardless of how remote.
Each of Flextronicss and Solectrons management has
determined, and each of their respective independent registered
public accounting firms have attested, that their respective
internal controls were effective as of the end of their most
recent fiscal years; however, during the course of integrating
Solectrons business, deficiencies, weaknesses or needed
improvements or enhancements to the internal controls of the
combined company may arise or be identified. Correcting these
deficiencies or weakness and implementing any needed
improvements and enhancements could require the combined company
to divert substantial resources, including management time, from
other activities. The failure to achieve and maintain the
adequacy of the combined companys disclosure controls and
procedures
and/or its
internal controls could result in a determination by management
and the combined companys independent registered public
accounting firm that the combined companys internal
controls are ineffective. If internal controls over financial
reporting are not considered adequate, the combined company may
experience a loss of public confidence, which could have an
adverse effect on its business and stock price.
The
combined company may take substantial restructuring charges in
connection with the merger, which may have a material adverse
impact on operating results.
As part of combining the two companies, Flextronics expects to
incur significant restructuring costs during the year commencing
with the closing of the acquisition. The financial results of
the combined company may be adversely affected by cash
expenditures and non-cash charges incurred in connection with
the restructuring and integration activities. These costs relate
to restructuring and integration activities centered around the
global footprint rationalization and elimination of redundant
assets or unnecessary functions and include retention bonuses,
the amounts of which cannot be currently estimated as management
of Flextronics has not yet determined all of the restructuring
activities. Certain liabilities associated with these
restructuring activities will be recorded as liabilities assumed
from Solectron, with a corresponding increase in goodwill and no
impact on operating results. Further, Flextronics and Solectron
have historically recognized substantial restructuring and other
charges resulting from reduced workforce and capacity at
higher-cost locations, and the consolidation and closure of
several manufacturing facilities, including related impairment
of certain long-lived assets. If the combined company is
required to take additional restructuring charges in the future,
it could have a material adverse impact on operating results,
financial position and the cash flows of the combined company.
34
PARTIES
TO THE MERGER
Flextronics
International Ltd.
Flextronics International Ltd., referred to in this joint proxy
statement/prospectus as Flextronics, is a leading provider of
advanced design and electronics manufacturing services (EMS) to
original equipment manufacturers (OEMs) in the following markets:
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computing, which includes products such as desktop, handheld and
notebook computers, electronic games and servers;
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mobile communication devices, which includes handsets operating
on a number of different platforms such as GSM, CDMA, TDMA and
WCDMA;
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consumer digital devices, which includes products such as set
top boxes, home entertainment equipment, printers, copiers and
cameras;
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industrial, semiconductor and white goods, which includes
products such as home appliances, industrial meters, bar code
readers and test equipment;
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automotive, marine and aerospace, which includes products such
as navigation instruments, radar components and instrument panel
and radio components;
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telecommunications infrastructure, which includes products such
as cable modems, cellular base stations, hubs and
switches; and
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medical devices, which includes products such as drug delivery,
diagnostic and telemedicine devices.
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Flextronics is one of the worlds largest EMS providers,
with revenues from continuing operations of $18.9 billion
in fiscal year 2007. As of March 31, 2007,
Flextronicss total manufacturing capacity was
approximately 17.7 million square feet in over 30 countries
across four continents. Flextronics has established an extensive
network of manufacturing facilities in the worlds major
electronics markets (Asia, the Americas and Europe) in order to
serve the growing outsourcing needs of both multinational and
regional OEMs. In fiscal year 2007, Flextronicss net sales
in Asia, the Americas and Europe represented 61%, 22% and 17% of
its total net sales, respectively.
Flextronicss portfolio of customers consists of many of
the technology industrys leaders, including Casio, Cisco
Systems, Dell, Eastman Kodak, Ericsson, Hewlett-Packard,
Kyocera, Microsoft, Motorola, Nortel, Sony-Ericsson and Xerox.
Flextronics is a globally recognized leading provider of
end-to-end, vertically integrated global supply chain services
through which it designs, builds, and ships a complete packaged
product for its OEM customers. These vertically integrated
services increase customer competitiveness by delivering
improved product quality, leading manufacturability, improved
performance, faster time-to-market and reduced costs.
Flextronics remains firmly committed to the competitive
advantage of vertical-integration, along with the continuous
development of its design capabilities in each of
Flextronicss major product categories. Flextronicss
OEM customers leverage its services to meet their requirements
throughout their products entire product life cycle.
Flextronicss services include:
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printed circuit board and flexible circuit fabrication;
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systems assembly and manufacturing;
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logistics;
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after-sales services;
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design and engineering services;
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original design manufacturing (ODM) services; and
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components design and manufacturing.
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Flextronics believes that these vertically integrated
capabilities provide it with a competitive advantage in the
market for designing and manufacturing electronic products for
leading multinational and regional OEMs. Through these services
and capabilities, Flextronics simplifies the global product
development process and provides meaningful time and cost
savings for its customers.
Flextronics was incorporated in the Republic of Singapore in May
1990. Its registered office address is located at One Marina
Boulevard, #28-00,
Singapore 018989, and its U.S. corporate headquarters is
located at 2090 Fortune Drive, San Jose, California, 95131.
Flextronicss website is located at
www.flextronics.com. Information contained on this
website does not constitute part of this joint proxy
statement/prospectus.
Solectron
Corporation
Solectron Corporation, referred to in this joint proxy
statement/prospectus as Solectron, provides electronics
manufacturing and supply chain services to OEMs around the
world. As a value-added contract manufacturing partner to OEMs,
Solectron contracts with its customers to build the
customers products or to provide services related to
product design, manufacturing and post-manufacturing
requirements. Solectron designs, builds, repairs and services
products that carry the brand names of its customers.
Solectron serves several electronics products and technology
markets. Much of Solectrons business is related to the
following products:
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computing and storage equipment, including servers, storage
systems, workstations, notebooks and peripherals;
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networking equipment such as routers and switches that move
traffic across the Internet;
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communications equipment, including wireless and wireline
infrastructure products;
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consumer products such as set-top boxes and personal/handheld
communications devices;
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automotive electronics systems, such as audio and navigation
systems, system control modules and body electronics;
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industrial products, including semiconductor manufacturing and
test equipment, wafer fabrication equipment controls, process
automation equipment, interactive and self-service kiosks,
appliance electronics controls, instrumentation and industrial
controls;
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medical products such as X-ray equipment, ultrasound fetal
monitors, MRI scanners, blood analyzers, insulin delivery
devices, ECG patient monitors, surgical robotic systems, HPLCs,
spectrometers and laser surgery equipment; and
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other electronics equipment and products.
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Solectrons customer base consists of many of the
worlds leading technology companies, such as Cisco
Systems, Ericsson, Hewlett-Packard, IBM, Lucent Technologies,
Motorola, NCR, NEC, Nortel Networks, Pace, Sun Microsystems and
Teradyne.
Solectrons comprehensive range of services are designed to
meet customer supply chain needs throughout the product life
cycle. Solectrons services include:
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product design;
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collaborative design;
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product launch/NPI (new product introduction);
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DFX (design for manufacturability) services;
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PCBA (printed circuit board assembly) and subsystem
manufacturing;
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systems integration and test;
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parts management;
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inventory management;
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forward/reverse logistics;
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repair;
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recovery/remarketing; and
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feedback to design and manufacturing for quality/serviceability.
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Solectron customizes these services to deliver integrated supply
chain solutions to its customers. Solectron offers services that
it believes will allow its customers to achieve cost, time and
quality advantages that improve their competitiveness and enable
them to focus on their core competencies of sales, marketing and
research and development. Solectron believes that its services
also allow customers to reduce or shift costs and risks
associated with manufacturing and supply chain management.
Solectron was first incorporated in California in August 1977
and was reincorporated in Delaware in February 1997.
Solectrons principal executive offices are located at 847
Gibraltar Drive, Milpitas, California 95035, and its telephone
number is
(408) 957-8500.
Solectrons website address is www.solectron.com.
Information contained in this website does not constitute part
of this joint proxy statement/prospectus.
Acquisition
Subsidiaries
Saturn Merger Corp. is a wholly-owned subsidiary of Flextronics
formed on May 29, 2007. Flextronics formed Saturn Merger
Corp. solely to effect the merger, and Saturn Merger Corp. has
not conducted any business during the period of its existence.
Saturn Merger II Corp. is a wholly-owned subsidiary of
Flextronics formed on June 29, 2007. Flextronics formed
Saturn Merger II Corp. solely to effect the second-step
merger, and Saturn Merger II Corp. has not conducted any
business during any period of its existence.
THE
FLEXTRONICS ANNUAL GENERAL MEETING
General
Flextronics is furnishing this joint proxy statement/prospectus
in connection with the solicitation by the board of directors of
Flextronics of proxies to be voted at the 2007 annual general
meeting of Flextronics shareholders, or at any adjournments
thereof, for the purposes set forth in the notice of annual
general meeting that accompanies this joint proxy
statement/prospectus.
Date,
Time and Place
The 2007 annual general meeting of Flextronics shareholders will
be held on , 2007
at :00 a.m.
California Time at Flextronicss principal
U.S. offices, 2090 Fortune Drive, San Jose,
California, 95131.
Items of
Business
At the Flextronics annual general meeting, Flextronics
shareholders will be asked to consider and vote upon the
following proposals:
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To authorize the directors of Flextronics to allot and issue
ordinary shares pursuant to the Agreement and Plan of Merger,
dated as of June 4, 2007, entered into among Flextronics,
Saturn Merger Corp., a wholly-owned subsidiary of Flextronics,
and Solectron Corporation (Proposal 1);
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To re-elect the following directors: James A. Davidson and
Lip-Bu Tan (Proposal 2);
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To re-appoint Mr. Rockwell A. Schnabel as a director of
Flextronics (Proposal 3);
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To approve the re-appointment of Deloitte & Touche LLP
as Flextronicss independent registered public accounting
firm for the 2008 fiscal year (Proposal 4);
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To approve a general authorization for the directors of
Flextronics to allot and issue ordinary shares
(Proposal 5);
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To approve the cash compensation payable to Flextronicss
non-employee directors (Proposal 6);
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To approve the renewal of the Share Purchase Mandate relating to
acquisitions by Flextronics of its own issued ordinary shares
(Proposal 7); and
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To approve amendments to Flextronicss 2001 Equity
Incentive Plan relating to: (a) a 5,000,000-share increase
in the sub-limit on the maximum number of ordinary shares which
may be issued as stock bonus awards and (b) a
10,000,000-share increase in the share reserve
(Proposals 8 and 9).
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Record
Date; Shareholders Entitled to Vote
The close of business
on , 2007 is the record
date for shareholders entitled to notice of the 2007 annual
general meeting of Flextronics. All of the ordinary shares
issued and outstanding
on , 2007, the date of
the annual general meeting, are entitled to be voted at the
annual general meeting, and shareholders of record
on , 2007 and entitled
to vote at the meeting will, on a poll, have one vote for each
ordinary share so held on the matters to be voted upon. As of
July 10, 2007, Flextronics had 608,940,696 ordinary shares
issued and outstanding.
Quorum
and Required Vote
Representation at the annual general meeting of at least
331/3%
of all issued and outstanding Flextronics ordinary shares is
required to constitute a quorum.
The affirmative vote by a show of hands of at least a majority
of the shareholders present and voting at the 2007 annual
general meeting, or, if a poll is demanded by the chair or by
holders of at least 10% of the total number of
Flextronicss paid-up shares in accordance with
Flextronicss Articles of Association, a simple majority of
the shares voting at the 2007 annual general meeting, is
required to re-elect and re-appoint the Directors nominated
pursuant to Flextronics Proposal Nos. 2 and 3, to
re-appoint Deloitte & Touche LLP as Flextronicss
independent registered public accounting firm pursuant to
Flextronics Proposal 4 and to approve the ordinary
resolutions contained in Flextronics Proposal Nos. 1, 5, 6
and 7. The affirmative vote of the holders of a majority of all
issued and outstanding shares voting in person or by proxy at
the 2007 annual general meeting is required to approve
Flextronics Proposal Nos. 8 and 9.
Eleven directors and executive officers of Flextronics, who
together hold
approximately % of
Flextronics ordinary shares outstanding as of the record date,
have agreed to vote in favor of the Proposal No. 1,
authorizing the directors of Flextronics to issue Flextronics
ordinary shares pursuant to the merger agreement. See the
section entitled Solectron Proposal and Flextronics
Proposal No. 1 The Voting
Agreements Flextronics Voting Agreement
beginning on page 110 of this joint proxy
statement/prospectus.
Abstentions and broker non-votes are considered
present and entitled to vote at the 2007 annual general meeting
for purposes of determining a quorum. A broker
non-vote occurs when a broker or other holder of record
who holds shares for a beneficial owner does not vote on a
particular proposal because the record holder does not have
discretionary power to vote on that particular proposal and has
not received directions from the beneficial owner. If a broker
or nominee indicates on the proxy card that it does not have
discretionary authority to vote as to a particular matter, those
shares will not be counted in the tabulation of the votes cast
on proposals presented to shareholders.
If a shareholder is a beneficial owner, his or her broker has
authority to vote the shareholders shares for or against
certain routine matters, even if the broker does not
receive voting instructions from the shareholder.
Routine matters include all of the proposals to be
voted on at the 2007 annual general meeting, other than the
proposal to authorize the directors to issue Flextronics
ordinary shares pursuant to the merger and the proposals to
amend Flextronicss 2001 Equity Incentive Plan.
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Proxies;
Revocation
Ordinary shares represented by proxies in the accompanying form
which are properly executed and returned to Flextronics will be
voted at the 2007 annual general meeting in accordance with the
shareholders instructions. Any shareholder of record has
the right to revoke his or her proxy at any time prior to voting
at the 2007 annual general meeting by (i) submitting a
subsequently dated proxy or (ii) by attending the meeting
and voting in person.
In the absence of contrary instructions, Flextronics ordinary
shares represented by proxies will be voted FOR the board
nominees in Flextronics Proposal Nos. 2 and 3 and FOR
Flextronics Proposal Nos. 1 and 4 through 9. Management
of Flextronics does not know of any matters to be presented at
the 2007 annual general meeting other than those set forth in
this joint proxy statement/prospectus and in the accompanying
notice. If other matters should properly come before the
meeting, the proxy holders will vote on such matters in
accordance with their best judgment.
Costs of
Solicitation
Flextronics and Solectron will share equally all fees and
expenses incurred in connection with the filing, printing and
mailing of this joint proxy statement/prospectus and the
registration statement on
Form S-4,
of which this joint proxy statement/prospectus forms a part. All
other costs of soliciting proxies for the Flextronics annual
general meeting will be borne by Flextronics. Following the
original mailing of this joint proxy statement/prospectus and
other soliciting materials, directors, officers and employees of
Flextronics may also solicit proxies from Flextronics
shareholders by mail, telephone,
e-mail, fax
or in person. These directors, officers and employees will not
receive additional compensation for those activities, but they
may be reimbursed for any reasonable out-of-pocket expenses.
Following the original mailing of this joint proxy
statement/prospectus and other soliciting materials, Flextronics
will request that brokers, custodians, nominees and other record
holders of its ordinary shares forward copies of the joint proxy
statement/prospectus and other soliciting materials to persons
for whom they hold ordinary shares and request authority for the
exercise of proxies. In these cases, Flextronics will reimburse
such holders for their reasonable expenses if they ask that
Flextronics do so. Flextronics has retained Georgeson Inc., an
independent proxy solicitation firm, to assist in soliciting
proxies at an estimated fee of $10,000, plus reimbursement of
reasonable expenses.
Financial
Statements
Flextronicss Annual Report on
Form 10-K
for the fiscal year ended March 31, 2007, which was filed
with the SEC on May 29, 2007, includes Flextronicss
audited consolidated financial statements, prepared in
conformity with accounting principles generally accepted in the
United States of America, or U.S. GAAP, together with the
Independent Registered Public Accounting Firms Report of
Deloitte & Touche LLP, Flextronicss independent
registered public accounting firm for the fiscal year ended
March 31, 2007. Flextronics publishes its U.S. GAAP
financial statements in U.S. dollars, which is the
principal currency in which Flextronics conducts its business.
Flextronics has prepared, in accordance with Singapore law,
Singapore statutory financial statements, which are included
with the annual report which will be delivered to shareholders
of Flextronics prior to the date of the 2007 annual general
meeting. Except as otherwise stated herein, all monetary amounts
in this joint proxy statement/prospectus have been presented in
U.S. dollars.
Flextronicss Singapore statutory financial statements
include:
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Flextronicss consolidated financial statements (which are
identical to those included in the Annual Report on
Form 10-K,
described above);
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supplementary financial statements (which reflect solely
Flextronicss standalone financial results, with the
companys subsidiaries accounted for under the equity
method rather than consolidated);
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a Directors Report; and
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the Auditors Report of Deloitte & Touche,
Flextronicss Singapore statutory auditors for the fiscal
year ended March 31, 2007.
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Flextronicss
Registered Office
The mailing address of Flextronicss registered office is
One Marina Boulevard, #28-00, Singapore 018989.
39
THE
SPECIAL MEETING OF SOLECTRON STOCKHOLDERS
Date,
Time and Place
The special meeting of Solectron stockholders will be held
at a.m.,
California Time,
on ,
2007 at Solectrons principal executive offices, 847
Gibraltar Drive, Building 5, Milpitas, California 95035.
Check-in will begin
at a.m.
and Solectron stockholders should allow ample time for the
check-in procedures.
Item of
Business
At the Solectron special meeting, Solectron stockholders will be
asked to consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of June 4, 2007, by
and among Flextronics, Saturn Merger Corp. and Solectron.
Solectron currently does not contemplate that any other matters
will be presented at the Solectron special meeting.
Admission
to the Special Meeting
Only Solectron stockholders, including joint holders, as of the
close of business
on ,
2007, the record date for the Solectron special meeting, and
other persons holding valid proxies for the special meeting are
entitled to attend the Solectron special meeting. Solectron
stockholders and their proxies who wish to attend the special
meeting should be prepared to present photo identification at
the meeting. In addition, Solectron stockholders who are record
holders will have their ownership verified against the list of
record holders as of the record date prior to being admitted to
the meeting. Solectron stockholders who are not record holders
but hold shares through a broker or nominee (i.e., in street
name) should provide proof of beneficial ownership on the record
date, such as their most recent account statement prior
to ,
2007, or other similar evidence of ownership. Anyone who does
not provide photo identification or comply with the other
procedures outlined above upon request will not be admitted to
the special meeting.
Method of
Voting; Record Date; Stock Entitled to Vote
Solectron stockholders are being asked to vote both shares held
directly in their name as stockholders of record and any shares
they hold in street name as beneficial owners.
Shares held in street name are shares held in a
stock brokerage account or shares held by a bank or other
nominee.
The method of voting differs for shares held as a record holder
and shares held in street name. Record holders will receive
proxy cards, as further described below under
Voting Procedures. Holders of
shares in street name will receive voting
instruction cards from their broker or nominee in order to
instruct their brokers or nominees how to vote.
Proxies are being solicited from Solectron stockholders on
behalf of the Solectron board of directors in connection with
the special meeting that is being held to consider and vote upon
a proposal to adopt the merger agreement.
Stockholders may receive more than one set of voting materials,
including multiple copies of this joint proxy
statement/prospectus and multiple proxy cards or voting
instruction cards. For example, stockholders who hold shares in
more than one brokerage account may receive a separate voting
instruction card for each brokerage account in which shares are
held. Stockholders of record whose shares are registered in more
than one name will receive more than one proxy card. In
addition, Flextronics is also soliciting votes for its annual
general meeting and stockholders who own shares of both
Solectron and Flextronics will also receive a proxy or voting
instruction card from Flextronics. A vote for the issuance of
Flextronics ordinary shares in connection with the merger at the
Flextronics annual general meeting will not constitute a vote
for the adoption of the merger agreement at the Solectron
special meeting, and vice versa. Therefore, the Solectron board
of directors urges Solectron stockholders to complete, sign,
date and return each proxy card and voting instruction card they
receive for the Solectron special meeting.
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Only stockholders of Solectron at the close of business
on ,
2007, the record date for the Solectron special meeting, are
entitled to receive notice of, and vote at, the Solectron
special meeting and any adjournment of such meeting. On the
record date,
approximately shares
of Solectron common stock were issued and outstanding and held
of record by
approximately
holders, and one share of Series B Preferred Stock was
issued and outstanding and held of record by Computershare
Trust Company of Canada, as trustee for the holders
of outstanding
exchangeable shares of Solectron Global Services Canada Inc., a
wholly-owned indirect subsidiary of Solectron. The holders of
Solectron common stock and the holder of the one share of
Series B Preferred Stock will vote together as a class.
Holders of Solectron common stock on the record date are each
entitled to one vote per share of Solectron common stock on the
proposal to adopt the merger agreement. The holder of the
outstanding share of Series B Preferred Stock is entitled
to a number of votes with respect to the share of Series B
Preferred Stock equal to the number of issued and outstanding
exchangeable shares of Solectron Global Services Canada Inc. as
of the record date for this meeting that are not owned by
Solectron, any of its subsidiaries or other affiliates. Holders
of record of exchangeable shares of Solectron Global Services
Canada Inc. (other than exchangeable shares held by Solectron,
its subsidiaries and its affiliates) at the close of business on
the record date will be entitled to notice of the special
meeting and to direct the vote of Computershare
Trust Company of Canada with respect to one vote for each
exchangeable share held. A complete list of Solectron
stockholders entitled to vote at the Solectron special meeting
will be available for inspection at the executive offices of
Solectron during regular business hours for a period of no less
than ten days prior to the Solectron special meeting.
Holders of exchangeable shares should refer to materials
enclosed with this joint proxy statement/prospectus, as well as
the information contained in Annex F attached to this joint
proxy statement/prospectus, informing such holders of their
rights with respect to directing the voting of the votes
attributable to the one share of Series B Preferred Stock,
including deadlines for submitting and revoking proxies.
Quorum;
Abstentions; Broker Non-Votes
A quorum of stockholders is necessary to have a valid meeting of
Solectron stockholders. A majority of the total voting power
represented by the shares of Solectron common stock (each share
of Solectron common stock represents one vote) and the one share
of Series B Preferred Stock (which represents a number of
votes equal to the number of issued and outstanding exchangeable
shares as of the record date for this meeting that are not owned
by Solectron, any of its subsidiaries or their affiliates)
issued and outstanding on the Solectron record date, counted
together as a single class, must be present in person or by
proxy at the Solectron special meeting in order for a quorum to
be established. In the event that a quorum is not present at the
Solectron special meeting, it is expected that the meeting will
be adjourned to solicit additional proxies.
Abstentions and broker non-votes count as present
for establishing the quorum described above. A broker
non-vote occurs when the broker has not received
instructions from the beneficial owner of the shares as to how
to vote the shares. It is expected that brokers, banks and other
nominees, in the absence of instructions from the beneficial
owners of shares of Solectron common stock, will not have
discretionary voting authority to vote those shares on the
merger agreement. Because adoption of the merger agreement
requires the affirmative vote of a majority of the aggregate
voting power of the outstanding shares of Solectron common stock
and the one share of Series B Preferred Stock, voting
together as a class (with the holder of the outstanding share of
Series B Preferred Stock entitled to a number of votes with
respect to such share equal to the number of issued and
outstanding exchangeable shares of Solectron Global Services
Canada Inc. as of the record date for this meeting that are not
owned by Solectron, any of its subsidiaries or their
affiliates), any Solectron stockholder that abstains, does not
vote on the merger proposal or that fails to instruct their
broker on how to vote shares of Solectron common stock held for
on such stockholders behalf by the broker will have the
same effect as a vote against the adoption of the merger
agreement. Similarly, any stockholder that holds exchangeable
shares of Solectron Global Services Canada Inc. that fails to
instruct Computershare Trust Company of Canada on how to
vote the one share of Series B Preferred Stock will have
the same effect as a vote against the adoption of the merger
agreement.
Adjournment
If a quorum is not present at the Solectron special meeting,
Solectrons bylaws provide that any adjournment of the
Solectron special meeting may be made by the Solectron
stockholders entitled to vote thereat, present in person
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or by proxy, without notice other than announcement at the
meeting, until a quorum is present. When a meeting is adjourned
to another time or place, notice of the adjourned meeting need
not be given as long as the time and place thereof are announced
at the meeting at which the adjournment is taken and provided
the adjournment is not for more than thirty days.
Required
Vote
The adoption of the merger agreement will require the
affirmative vote of the holders of a majority of the aggregate
voting power of the outstanding shares of Solectron common stock
and the one share of Series B Preferred Stock, voting
together as a single class (with the holder of the outstanding
share of Series B Preferred Stock entitled to a number of
votes with respect to such share equal to the number of issued
and outstanding exchangeable shares of Solectron Global Services
Canada Inc. as of the record date for this meeting that are not
owned by Solectron, any of its subsidiaries or their
affiliates). Eighteen directors and executive officers of
Solectron, who together hold
approximately %
of Solectron common stock outstanding as of the record date,
have agreed to vote in favor of the merger. See the section
entitled Solectron Proposal and Flextronics Proposal
No. 1 The Voting Agreements
Solectron Voting Agreement beginning on page 109 of
this joint proxy statement/prospectus.
Share
Ownership of Directors and Executive Officers of
Solectron
As of the date of the merger agreement, directors and executive
officers of Solectron beneficially owned and were entitled to
vote approximately 1.6% of the shares of Solectron common stock
outstanding on that date.
Voting
Procedures
Submitting
Proxies or Voting Instructions
Whether Solectron stockholders hold shares of Solectron common
stock directly as stockholders of record or in street
name, Solectron stockholders may direct the voting of
their shares without attending the Solectron special meeting.
Solectron stockholders may vote shares held directly by granting
proxies or, for shares held in street name, by submitting voting
instructions to their brokers or nominees.
Record holders of shares of Solectron common stock may submit
proxies by completing, signing and dating their proxy cards for
the Solectron special meeting and mailing them in the
accompanying pre-addressed envelopes. Solectron stockholders who
hold shares in street name may vote by mail by
completing, signing and dating the voting instruction cards for
the Solectron special meeting provided by their respective
brokers and nominees and mailing them as instructed by their
respective brokers and nominees.
If Solectron stockholders of record do not include instructions
on how to vote their properly signed proxy cards for the
Solectron special meeting and do not revoke their proxies, their
shares will be voted FOR the proposal to approve the
adoption of the merger agreement, and (to the extent allowed by
applicable law) in the discretion of the proxy holders on any
other business that may properly come before the Solectron
special meeting or any adjournment thereof.
If Solectron stockholders holding shares of Solectron common
stock in street name do not provide voting
instructions to their broker, bank or other nominees, their
shares cannot be voted in favor of the proposal to adopt the
merger agreement and will therefore have the same effect as a
vote against the proposal.
Stockholders of record of Solectron common stock may also vote
in person at the Solectron special meeting by submitting their
proxy cards or by filling out a ballot at the special meeting.
If shares of Solectron common stock are held by Solectron
stockholders in street name, those Solectron
stockholders may not vote their shares in person at the
Solectron special meeting unless they bring a signed proxy from
the record holder giving them the right to vote their shares and
fill out a ballot at the special meeting.
All Solectron stockholders may also vote their shares via the
Internet or by telephone. When voting by Internet, Solectron
stockholders may transmit their voting instructions for
electronic delivery of information up until
11:59 p.m. New York City Time
on ,
2007. Solectron stockholders should have their proxy cards in
hand
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when they access the web site and follow the instructions to
obtain their records and to create an electronic voting
instruction form. When voting by telephone
( ),
Solectron stockholders may use any touch-tone telephone to
transmit their voting instructions up until
11:59 p.m. New York City Time
on ,
2007. Solectron stockholders should have their proxy card in
hand when they call and follow the instructions.
Holders of exchangeable shares should refer to materials
enclosed with this joint proxy statement/prospectus, as well as
the information contained in Annex F attached to this joint
proxy statement/prospectus, which contain information regarding
the rights of such holders with respect to directing the voting
of the votes attached to the one share of Series B
Preferred Stock including deadlines for submitting and revoking
proxies.
Revoking
Proxies or Voting Instructions
Solectron stockholders may change their votes at any time prior
to the vote at the Solectron special meeting. Solectron
stockholders of record may change their votes by granting new
proxies bearing a later date (which automatically revoke the
earlier proxies) or by attending the Solectron special meeting
and voting in person. Attendance at the Solectron special
meeting in and of itself will not cause previously granted
proxies to be revoked, unless Solectron stockholders
specifically so request. For shares held in street
name, Solectron stockholders may change their votes by
submitting new voting instructions to their brokers or nominees
or by attending the Solectron special meeting and voting in
person, provided that they have obtained a signed proxy from the
record holder giving them the right to vote their shares.
Proxy
Solicitation
Flextronics and Solectron will share equally all fees and costs
associated with printing and filing this joint proxy
statement/prospectus and the registration statement on
Form S-4,
of which this joint proxy statement/prospectus forms a part,
that has been filed with the SEC. Other than the costs shared
with Flextronics noted above, the cost of soliciting proxies
from Solectron stockholders will be paid by Solectron.
In addition to the mailing of these proxy materials, the
solicitation of proxies or votes may be made in person or by
telephone, facsimile, telegram or electronic means by
Solectrons directors, officers and employees, who will not
receive any additional compensation for such solicitation
activities.
Solectron has retained InnisFree M&A Incorporated to assist
it in the solicitation of proxies. Solectron estimates that its
proxy solicitor fees will be approximately $25,000 plus
out-of-pocket
expenses.
Contact
for Questions and Assistance in Voting
Any Solectron stockholder who has a question about the merger,
or how to vote or revoke a proxy, or who wishes to obtain
additional copies of this joint proxy statement/prospectus,
should contact:
InnisFree
M&A Incorporated
501 Madison Avenue,
20th
Floor
New York, New York, 10022
Toll Free
from within the
United States and Canada: (877) 825-8971
Banks and Brokers call collect: (212) 750-5833
Other
Matters
Solectron is not aware of any other business to be acted upon at
the Solectron special meeting. Solectrons bylaws also
provide that no matter may be brought before a special meeting
which is not stated in the notice of the special meeting.
43
SOLECTRON
PROPOSAL AND FLEXTRONICS PROPOSAL NO. 1
THE
MERGER
The following is a description of the material aspects of the
merger, including the merger agreement. While Flextronics and
Solectron believe that the following description covers the
material terms of the merger, the description may not contain
all of the information that is important to you. For a more
complete understanding of the merger, Flextronics and Solectron
encourage you to read carefully this entire joint/proxy
statement prospectus, including (i) the merger agreement
attached to this joint proxy statement/prospectus as
Annex A-1,
which is the merger agreement for the first step of the
integrated two-step merger or, if applicable, for the single
step merger, and (ii) the merger agreement attached to this
joint proxy statement/prospectus as
Annex A-2,
which is the merger agreement for the second step of the
integrated two-step merger.
Background
of the Merger
Flextronics and Solectron are both global providers of advanced
design and vertically integrated electronics manufacturing
services. Each company routinely evaluates business alternatives
and strategic opportunities as part of their ongoing evaluation
of developments in the marketplace, and participates in
discussions with third parties regarding possible transactions.
On December 15, 2006, in order to educate itself on the
range of alternatives potentially available to the company,
Solectron management requested representatives of Goldman,
Sachs & Co., referred to in this joint proxy
statement/prospectus as Goldman Sachs, to make a presentation to
management regarding the EMS industry generally,
Solectrons current operations and prospects, and strategic
alternatives potentially available to the company. The strategic
alternatives that Goldman Sachs discussed with management
included (i) continuing as a standalone company and
executing on its current objectives (as articulated in
Solectrons investor presentation in November 2006),
(ii) acquiring other companies, (iii) engaging in a
going private transaction through a leveraged buyout, and
(iv) a strategic business combination transaction.
On January 9, 2007, during a regularly scheduled meeting of
the Solectron board, representatives of Goldman Sachs made a
presentation to the board of directors regarding the EMS
industry generally, and gave an overview of various strategic
alternatives potentially available to Solectron, including the
potential benefits and risks to Solectron and its stockholders
associated with those alternatives. The strategic alternatives
Goldman Sachs discussed with management included continuing as a
standalone company and executing on its current plan, pursuing
an acquisition strategy focused on end market diversification,
pursuing an acquisition strategy focused on the acquisition of
vertical assets and capabilities, a merger with a top
tier EMS company and a leveraged buyout. At the conclusion
of this board meeting and after discussion among the Solectron
board, the Solectron board authorized Mr. Tufano to explore
strategic alternatives for Solectron, including the potential
acquisition of Solectron by a third party.
On March 19, 2007, Mr. Michael M. McNamara, Chief
Executive Officer of Flextronics, and Mr. Paul Tufano,
Executive Vice President and Interim President and Chief
Executive Officer of Solectron, met and discussed the EMS
industry generally and a potential combination between their
companies. During this meeting, Messrs. McNamara and Tufano
agreed to designate a member of their respective business teams
to meet periodically to explore the viability of a business
combination between the two companies and the potential
synergies and opportunities that could be realized in such a
transaction. Mr. Paul Read, Senior Vice President of
Worldwide Operations of Flextronics, and Mr. Robert
DeVincenzi, Senior Vice President of Corporate Development at
Solectron, were appointed as the designees. Following the March
19 meeting, Mr. Tufano informed the members of the
Solectron board of the meeting he had with Mr. McNamara and
the
follow-up
discussions that would be occurring between Mr. Read and
Mr. DeVincenzi.
On April 3, 2007, Flextronics and Solectron executed a
mutual confidentiality agreement covering the discussions
between the companies and any material that might be exchanged
by the companies.
44
On April 4, 2007, Mr. Read and Mr. DeVincenzi met
for the first time. During the meeting, they discussed the
process of data exchange between the two companies and
identified subject areas to be reviewed in order to assess
whether a business combination could be viable.
From April 10, 2007 through April 12, 2007, the
Solectron board held a regularly scheduled meeting. During the
course of the meeting, representatives of Goldman Sachs met with
the board and made a presentation regarding the EMS industry
generally, Solectron, its prospects and its position in the
industry, industry trends, Solectrons risks and
opportunities, and potential strategic alternatives available to
the company. At the time of its presentation, the Goldman Sachs
representatives were not aware of the meetings that had taken
place between Solectron and Flextronics. The Goldman Sachs
representatives then reviewed various strategic alternatives
potentially available to Solectron. As part of this review,
representatives of Goldman Sachs private equity group
provided a detailed analysis of the EMS industry and
Solectrons position within the industry. Following the
presentation by the Goldman Sachs private equity group,
the Goldman Sachs representatives discussed other potential
strategic alternatives and evaluated potential partners for a
business combination transaction.
At the conclusion of the Goldman Sachs presentation,
Mr. Tufano indicated that he concurred with many of the
conclusions and opinions expressed by Goldman Sachs.
Mr. Tufano updated the board on his recent discussion with
Mr. McNamara, and indicated that Flextronics had recently
expressed an interest in exploring a business combination
between the two companies, although the discussions were
preliminary and no price or structure had been discussed. The
Solectron board authorized Mr. Tufano to explore the level
of Flextronicss interest in pursuing a combination of the
two companies.
On April 13, 2007, April 16, 2007 and April 18,
2007, Mr. Read and Mr. DeVincenzi met to continue the
exchange of information and to explore the viability of a
business combination between Solectron and Flextronics. A
principal focus of these meetings was to review potential
synergies that could be realized from such a transaction.
On April 20, 2007, Mr. Tufano and Mr. McNamara
met to review the efforts of Mr. Read and
Mr. DeVincenzi to date and to discern the level of interest
held by each company in pursuing a potential transaction.
On April 23, 2007, Mr. McNamara and Mr. Thomas J.
Smach, the Chief Financial Officer of Flextronics, briefed
individual Flextronics board members about the status of the
merger discussions with Solectron.
On April 25, 2007, Flextronics delivered a letter of intent
to Solectron management, which proposed a merger transaction
whereby Solectron would be acquired by Flextronics. The letter
of intent did not contain a price, nor was it specific as to
whether the consideration would be paid in cash or stock. The
letter of intent included an exclusivity provision. Solectron
did not sign the letter of intent.
On April 27, 2007, the board of directors of Solectron held
a special meeting. Mr. Tufano updated the board concerning
the meetings and discussions between Solectron management and
representatives of Flextronics concerning the viability of a
potential business combination transaction between the two
companies. Mr. Tufano noted that on the basis of the work
performed and the continuing interest expressed by Flextronics,
it appeared that Flextronics was interested in further exploring
such a transaction and that the potential benefits of such a
transaction could be significant. Mr. Tufano noted that if
the board was interested in having management pursue further
discussions, management felt that it would be appropriate for
the board to engage both a financial advisor and outside legal
counsel to advise the board on the process and enable the board
to determine effectively whether or not such a transaction was
in the best interest of the companys stockholders. The
board determined, that based on information obtained to date,
including the strategic analysis of Solectrons current
risks, opportunities and prospects and the potential benefits to
Solectron and its stockholders that could be achieved from such
a combination, it would be in the best interest of the
stockholders to further explore the possibility of a business
combination between Flextronics and Solectron and that retention
of financial and outside legal advisors was warranted. The board
discussed retaining various advisors and, based on the quality
of the work done by Goldman Sachs to date and Goldman
Sachs familiarity with Solectron and the EMS industry,
decided to retain Goldman Sachs as financial advisor to the
company. The board also decided to retain the companys
regular outside corporate counsel, Wilson Sonsini Goodrich and
Rosati, Professional Corporation, referred to in this joint
proxy statement/prospectus as WSGR, as the companys
outside legal advisor in exploring any transaction.
45
On April 30, 2007, Mr. Smach and Mr. DeVincenzi
had a conference call to discuss the investment banking advisors
of each company and the participation of the investment banking
firms in the process.
Effective April 30, 2007, Flextronics engaged Citigroup
Global Markets Inc., referred to in this joint proxy
statement/prospectus as Citigroup, as its financial advisor in
connection with the proposed merger.
On May 1, 2007, the Flextronics board of directors held a
meeting at which the board reviewed the status of the merger
discussions with Solectron. During this meeting,
Mr. McNamara presented his views on the expected benefits
of a merger with Solectron. The board determined that management
should continue discussions with Solectron and appointed a
special acquisition committee comprised of Messrs. James A.
Davidson, Michael E. Marks and Ajay B. Shah to receive periodic
updates from management about the progress of discussions,
evaluate any acquisition proposals and provide the full Board
with updates and recommendations.
On May 1, 2007, Mr. Read and Mr. DeVincenzi met
to continue their discussions concerning the financial analysis
materials prepared by the companies respective financial
advisors.
On May 1, 2007, the companies began exchanging due
diligence materials and conducting due diligence investigations
of each other. The due diligence review, which involved the
exchange of information and numerous calls and meetings between
members of management of the two companies and their financial
and legal advisors, continued through June 3, 2007.
On May 2, 2007, representatives of Solectron and
Flextronics met at the offices of WSGR. Representatives of WSGR
were present in person at the meeting, and representatives of
Curtis, Mallet-Prevost, Colt & Mosle LLP, referred to
in this joint proxy statement/prospectus as CM-P,
Flextronicss outside legal advisor, attended the meeting
by conference call. The parties discussed a potential
transaction timeline and the reciprocal due diligence review to
be conducted by each side.
On May 4, 2007, the board of directors of Solectron held a
special meeting at which representatives of WSGR gave a
presentation concerning the boards fiduciary duties in the
context of a possible combination between Flextronics and
Solectron.
On May 9, 2007, Messrs. McNamara and Smach updated
members of the Flextronics special acquisition committee about
the progress of the companys valuation analysis of
Solectron and the possible range of financial terms for a
transaction.
On May 13, 2007, Mr. McNamara and Mr. Tufano met
to discuss the progress of discussions, the due diligence review
conducted to date and the possible structure and financial terms
of a transaction. Following the meeting, Mr. Tufano spoke
by telephone with Mr. Smach to discuss the structure and
financial terms of the potential transaction.
On May 14, 2007, members of Flextronics and Solectron
management, and representatives of Goldman Sachs and Citigroup,
met at the offices of WSGR to negotiate the terms of the
potential transaction, including valuation.
On May 16, 2007, Messrs. McNamara and Smach held a
conference call with the Flextronics special acquisition
committee to discuss the valuation and structure of the proposed
merger. The committee authorized management to propose a letter
of intent to Solectron which included a fixed purchase price of
$3.80 per share, and providing for a maximum of 60% stock
consideration and 50% cash consideration.
On May 16, 2007, Citigroup, on behalf of Flextronics,
delivered a proposed letter of intent to Goldman Sachs that
outlined certain terms for the acquisition of Solectron by
Flextronics. The proposed terms included a fixed purchase price
of $3.80 per share, which represented an implied exchange ratio
of 0.334 based on the closing price of Flextronicss shares
on May 16, 2007, and a premium of 13.8% to the closing
price of Solectrons stock on May 16, 2007; the right
of Solectrons stockholders to elect to receive cash or
stock as consideration, subject to maximum caps of 60% stock
consideration and 50% cash consideration; and an exclusivity
period that would extend until June 15, 2007. Solectron did
not sign the letter of intent.
On May 17, 2007, the Solectron board met to discuss the
letter of intent and the status of discussions with Flextronics.
Members of Solectrons management and representatives of
Goldman Sachs and WSGR were present at the meeting. At this
meeting, the Solectron board discussed the terms of the proposed
letter of intent with senior
46
management of Solectron and the Goldman Sachs and WSGR
representatives. The representatives of Goldman Sachs presented
various data and analyses to the board regarding Solectron on a
standalone basis, analyses of the companies on a combined basis,
a review of potential synergies that could be realized from the
combination, and an analysis of the implied value of the
proposed transaction to the companys stockholders. The
WSGR representatives reviewed with the board members their
fiduciary duties in connection with their consideration of the
letter of intent and potential business combination. At the
conclusion of the meeting, the board authorized Mr. Tufano
to make a counterproposal which included a higher premium, an
increased cap for the stock consideration, and a fixed exchange
ratio structure.
Following the May 17, 2007, board meeting, Mr. Tufano
made a counterproposal to Mr. McNamara on the terms
authorized by the Solectron board. Members of management of
Solectron and Flextronics engaged in further negotiations
regarding the terms of the proposed merger.
On May 19, 2007, Flextronics presented a revised letter of
intent to Solectron. The revised letter of intent proposed a
merger whereby Flextronics would acquire Solectron; a fixed
exchange ratio structure; an exchange ratio of 0.3450, which
represented an implied price of $3.87 and a premium of 15.4% to
the Solectron closing stock price on May 18, 2007; and that
each Solectron stockholder (with respect to all Solectron stock
held by such stockholder) could elect to receive either cash or
stock consideration subject to a maximum stock component of
seventy percent (70%) and a maximum cash component of fifty
percent (50%). The revised letter of intent provided for the
actual per share cash consideration to be determined based on
the average per share closing prices for Flextronics ordinary
shares prior to the date the definitive merger agreement is
signed. Solectron did not sign the letter of intent.
On May 20, 2007, the Solectron board met to discuss the
terms of the revised letter of intent. Members of Solectron
management and representatives of WSGR and Goldman Sachs were
present at the meeting. The representatives of Goldman Sachs
presented various data and analyses to the board regarding
Solectron on a standalone basis, analyses of the companies on a
combined basis, a review of potential synergies that could be
realized from the combination, and an analysis of the implied
value of the proposed transaction to the companys
stockholders. At the conclusion of the meeting, the board
authorized Mr. Tufano to negotiate a definitive agreement
consistent with the terms of the revised letter of intent.
On May 21, 2007, Goldman Sachs advised Citigroup that
Solectrons board had authorized Solectron management to
negotiate a definitive agreement consistent with the terms of
the revised letter of intent, which Citigroup communicated to
Flextronics management.
On May 21, 2007, Messrs. McNamara and Smach held a
conference call with the Flextronics special acquisition
committee to update the committee on the status of negotiations.
On May 22, 2007, the Solectron board held a special
meeting. Members of Solectron management and representatives of
WSGR and Goldman Sachs were present at the meeting. Solectron
management reviewed with the board the synergy analysis that had
been performed to date, which reflected collaborative synergy
discovery with Flextronics. The management presentation included
discussions of potential tangible and intangible synergies
(including cost-savings) that could be realized from a
combination of the companies, the likelihood and timing of
realizing such synergies and the risks to realization. Members
of Solectron management also reviewed with the board their
general perspective on Flextronics and its management team.
Representatives of Goldman Sachs and WSGR discussed with the
board the process and steps to be completed before a merger
agreement could be signed, and the general steps and timeframe
for the closing of a transaction. Representatives of WSGR also
discussed the anticipated regulatory review of the transaction
and the potential risks to a closing.
On May 26, 2007, on behalf of Flextronics, CM-P delivered
to WSGR a draft merger agreement. From May 26, 2007 until
June 3, 2007, members of Flextronics management and
representatives of CM-P and Citigroup negotiated the provisions
of the merger agreement with members of Solectron management and
representatives of WSGR and Goldman Sachs. The parties agreed
that, based on a June 4, 2007 signing date, the cash
component of the merger consideration would be $3.89 for each
Solectron share, based on the fixed exchange ratio of 0.3450 and
the average closing price of Flextronicss ordinary shares
for the five trading days ending on May 31, 2007.
47
On June 1, 2007, the Solectron board met to further
consider the proposed merger with Flextronics, to review the
terms of the definitive merger agreement and to evaluate
Solectrons due diligence review of Flextronics and the
financial analysis prepared by Goldman Sachs. Members of
management and representatives of Goldman Sachs and WSGR were
present at the meeting. During the meeting, representatives of
Goldman Sachs gave a presentation to the board regarding
Flextronicss business, industry position and management
and the rationale and other considerations regarding the
proposed transaction. In addition, the Goldman Sachs
representatives delivered a detailed presentation to the board
which included an overview of the EMS industry, various data and
analyses regarding Solectron on a standalone basis, analyses of
the companies on a combined basis, a review of potential
synergies that could be realized from the combination, and an
analysis of the implied value of the proposed transaction to the
companys stockholders. Representatives of WSGR reviewed
with the Solectron board the terms and conditions of the
proposed merger agreement, the boards fiduciary duties
with respect to its consideration of the transaction and the
anticipated regulatory review of the transaction. Members of
management and representatives of WSGR and KPMG LLP presented
the findings of their respective due diligence investigations of
Flextronics.
At the request of the Solectron board, Mr. McNamara was
invited to present to the Solectron board his perspectives on
the EMS industry and his plans for integrating the two companies
and achieving synergies resulting from combining the two
companies.
On June 1, 2007, Flextronicss board of directors
convened a special meeting, which was attended by members of the
companys senior management, as well as representatives of
CM-P and Citigroup. Mr. McNamara provided a detailed review
of the proposed merger, its strategic rationale and integration
matters. Mr. Smach then presented a detailed review of the
financial terms of the transaction, and the financing
alternatives, including a commitment by Citigroup to provide a
$2.5 billion senior, unsecured term loan facility to
finance the cash requirements of the transaction. Mr. Read,
Mr. Christopher Collier, Senior Vice President of Finance,
and Mr. Terry Zale, Vice President of Corporate Finance,
then reviewed with the board the results of the companys
business, financial and legal due diligence investigation. CM-P
reviewed the terms of the proposed merger agreement and voting
agreements and the status of the negotiations of these
agreements. CM-P also reviewed the anticipated timeline for
closing the merger, including the expected regulatory approval
process. Citigroup then gave its preliminary presentation to the
Flextronics board regarding its financial analysis of the
proposed cash and stock consideration to be paid in the merger,
which analysis was subject to confirmation at such time as
Citigroup was requested to render a fairness opinion regarding
the merger consideration. Following these presentations and
further discussion, the Flextronics board, by resolution adopted
by the unanimous vote of all directors, subject to the approval
of the final terms of the merger agreement by the Flextronics
special acquisition committee, determined that it is in the
interest of the company to enter into the merger agreement,
approved and adopted the merger agreement, and resolved to
recommend that Flextronics shareholders vote FOR the
issuance of Flextronics ordinary shares required to be issued in
the merger.
On June 3, 2007, the Solectron board met to review the
proposed transaction. Members of management and representatives
of Goldman Sachs and WSGR were present at the meeting.
Representatives of WSGR reviewed with the Solectron board the
terms of the proposed merger agreement, including the changes
that had been negotiated since the June 1, 2007 board
meeting. During this meeting, representatives from Goldman Sachs
presented their financial analysis of the fairness from a
financial point of view to the holders of Solectron common stock
of the proposed cash and stock consideration to be received by
such holders, taken in the aggregate, and delivered Goldman
Sachss oral opinion to the Solectron board, and
subsequently confirmed such opinion in writing on June 4,
2007, that, as of the date of such opinion, the stock
consideration and the cash consideration to be received by the
holders of Solectron common stock, taken in the aggregate, was
fair from a financial point of view to Solectrons
stockholders. Following these presentations, the Solectron
board, acting unanimously, determined that the merger was fair
to, and in the best interests of, Solectron and its
stockholders, approved the merger agreement, the merger and the
other transactions contemplated thereby and resolved to
recommend that Solectron stockholders vote FOR the
adoption of the merger agreement.
On June 3, 2007, the Flextronics special acquisition
committee held a telephonic meeting to review the proposed
merger. CM-P updated the committee on the terms of the merger
agreement and voting agreements, including the resolution of
issues that were outstanding at the time of the June 1 board
meeting. Citigroup reviewed
48
the financial terms of the proposed merger and delivered its
oral opinion, subsequently confirmed in writing as of the same
date, that, as of June 3, 2007 and based on and subject to
the factors and assumptions set forth in its opinion, the cash
and stock consideration to be paid by Flextronics in the merger
was fair to Flextronics from a financial point of view.
Following the presentations, and after further review and
discussion, the special acquisition committee approved the
merger agreement, the merger and the other transactions
contemplated thereby and authorized management to complete the
negotiation of the merger agreement.
On June 4, 2007, Flextronics and Solectron executed the
merger agreement. Flextronics and Solectron issued a joint press
release announcing the execution of the merger agreement before
the opening of trading on June 4, 2007.
Flextronicss
Reasons for the Merger and Board Recommendation
When considering whether to approve the merger agreement and the
merger, and to recommend that Flextronics shareholders approve
the issuance of ordinary shares in the merger, the Flextronics
board of directors consulted with Flextronicss management,
its legal counsel regarding the terms of the merger, and its
financial advisors regarding the financial aspects of the merger
and the fairness, from a financial point of view, of the
consideration to be paid by Flextronics. The factors that the
Flextronics board of directors considered in reaching its
determination included, but were not limited to, the following:
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the strategic benefits of the merger, as identified in the
section entitled Flextronicss Reasons for the Merger
and Board Recommendation beginning on page 49 of this
joint proxy statement/prospectus;
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managements assessment of the financial condition, results
of operations and businesses of Flextronics and Solectron before
and after giving effect to the merger;
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reports from Flextronicss management and legal and
financial advisors as to the results of the due diligence
investigation of Solectron;
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financial market conditions, historical share prices, and other
trading data relating to Flextronics ordinary shares and the
common stock of Solectron;
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the opinion of Citigroup, as described below in the section
entitled Opinion of Flextronicss Financial
Advisor beginning on page 51 of this joint proxy
statement/prospectus, that as of June 3, 2007, and subject
to the factors, assumptions, procedures, limitations and
qualifications set forth in Citigroups written opinion, a
copy of which is attached to this joint proxy
statement/prospectus as Annex D, the consideration to be
paid by Flextronics in the merger is fair, from a financial
point of view, to Flextronics;
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the structure of the merger, including the fixed exchange ratio
of 0.3450 and the right of Solectron stockholders to elect to
receive either Flextronics shares or cash, subject to the
limitation that not more than 70% in the aggregate and no less
than 50% in the aggregate of Solectron shares will be converted
into shares of Flextronics;
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the belief that the terms of the merger agreement, including the
parties representations, warranties and covenants, and the
conditions to their respective obligations, are reasonable;
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the various alternatives for funding the cash requirements of
the transaction, including the terms and conditions of the
$2.5 billion, seven-year, senior unsecured term loan
facility that Citigroup has committed to provide in connection
with the merger;
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managements projections of Flextronics as an independent
company; and
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other strategic alternatives for Flextronics.
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The Flextronics board of directors also identified and
considered a variety of potentially negative factors in its
deliberations concerning the merger, including, but not limited
to:
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the risk that the potential benefits sought in the merger,
including anticipated synergies, might not be fully realized;
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the possibility that the merger may not be completed, or that
completion of the merger may be delayed;
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49
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the challenges and substantial costs of combining the two
businesses and the expenses to be incurred in connection with
the merger, including the risk that delays or difficulties in
completing the integration, could adversely affect the combined
companys operating results and delay or prevent the
realization of anticipated synergies, cost savings or other
anticipated benefits from the merger;
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the risk that despite the efforts of the combined company, key
technical and management personnel may depart as a result of the
merger; and
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various other risks associated with the merger and the
businesses of Flextronics and the combined company described in
the section entitled Risk Factors beginning on
page 26 of this joint proxy statement/prospectus.
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Although these potentially negative factors were considered by
the Flextronics board of directors during its deliberations, the
board concluded that, overall, the potential benefits of the
merger outweighed any potentially negative factors associated
with the merger.
At a meeting held on June 1, 2007, the Flextronics board of
directors unanimously voted to approve the merger agreement and
the merger, subject to approval of the final terms of the merger
agreement by the Flextronics special acquisition committee, and
to recommend that Flextronics shareholders vote FOR
a proposal at the Flextronics annual general meeting authorizing
the issuance of Flextronics ordinary shares in connection with
the merger. The Flextronics board of directors based its
decision on a variety of factors, including, without limitation,
a belief that the proposed merger creates more value for the
combined companys customers, employees and shareholders,
and a more diversified and competitive company that is
positioned to achieve greater profits, cash flows, and returns.
In reaching this conclusion, the board identified the following
anticipated strategic benefits of the merger:
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Enhanced Competitive Position. Combining
Flextronics and Solectron would create the most diversified and
premier global provider of advanced design and vertically
integrated EMS with the broadest worldwide EMS capabilities,
from design resources to end-to-end vertically integrated global
supply chain services. The combined company would be able to use
its increased scale to realize significant cost savings and
further extend its reach within established market segments.
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Improved Customer Offering. By adding
Solectrons resources and unique skill sets, Flextronics
would be able to provide more value innovation to its customers
by leveraging the combined global economies of scale in
manufacturing, logistics, procurement, design, engineering, and
ODM services. A larger company would be more competitive and
therefore better-positioned to deliver supply chain solutions
that fulfill its customers increasingly complex
requirements. The combined company would be expected to improve
the competitive position of its customers by simplifying their
global product development process while also delivering
improved product quality with enhanced performance and faster
time to market.
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Complementary Businesses. Solectrons
strengths in high-end computing, communications, and networking
infrastructure market segments complement Flextronicss
strengths in vertical integration and ODM capabilities and its
expertise in cell phones and consumer electronics. The combined
company would be a leading EMS supplier of high-end products,
enhancing and leveraging Flextronicss global leadership
position in high-volume, low-cost products. In addition,
Solectrons after-market sales support, repair service, and
build to order/configure to order capabilities would be a
valuable addition to Flextronicss existing end-to-end
vertically integrated service capabilities.
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Operating Synergies. Over the last
18 months, Flextronics has reorganized its management
structure, creating the infrastructure required to effectively
and efficiently add scale to its operations and enable it to
achieve the synergies expected from the successful integration
of Solectrons operations. The combined company would be
expected to realize cost savings from manufacturing and
operating expense reductions, which will result from global
footprint rationalization and the elimination of redundant
assets or unnecessary functions. Additional costs savings would
be expected from leveraging increased scale and purchasing
power, and the expansion of vertical integration would be
expected to drive higher combined profitability. In addition,
combined capital expenditures would be reduced by the
redeployment of equipment and rationalized manufacturing
locations.
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50
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Diversification. Flextronicss current
product portfolio is highly concentrated in the mobile segment,
which represented approximately 31% of Flextronicss
revenues for the quarter ended March 31, 2007, followed by
consumer digital at 24%, infrastructure at 23%, industrial,
auto, medical and other at 12%, and computing at 10% of
revenues. By comparison, infrastructure represented 42% of
Solectrons revenues for the quarter ended March 2,
2007, followed by computing at 34%, industrial, auto, medical
and other at 12%, and consumer digital at 12%. Following the
merger, the combined company will have a more diversified and
balanced customer and product mix, especially with regard to the
mobile and infrastructure market segments, which may better
position the combined company to withstand end market, customer
and product volatility in the future.
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The foregoing description of the material factors considered by
the Flextronics board of directors is not intended to be
exhaustive, but represents the principal factors considered by
the Flextronics board of directors when reaching its decision to
approve the merger agreement and the merger and to recommend
that Flextronics shareholders authorize the issuance of
Flextronics ordinary shares in connection with the merger.
The Flextronics board of directors unanimously recommends
that Flextronics shareholders vote FOR the proposal
to approve the issuance of Flextronics ordinary shares pursuant
to the merger agreement.
Opinion
of Flextronicss Financial Advisor
Flextronics retained Citigroup as its financial advisor in
connection with the acquisition. Pursuant to Citigroups
engagement letter with Flextronics, dated April 30, 2007,
Citigroup made a presentation to the Flextronics board of
directors in which Citigroup reviewed certain financial analyses
described below and rendered to the Flextronics special
acquisition committee an oral opinion, subsequently confirmed in
writing to the Flextronics board of directors, that as of
June 3, 2007, and subject to the factors, assumptions,
procedures, limitations and qualifications set forth in the
opinion, the consideration to be paid by Flextronics in the
acquisition is fair, from a financial point of view, to
Flextronics.
The full text of Citigroups written opinion dated
June 3, 2007, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is included as
Annex D to this joint proxy statement/prospectus and is
incorporated herein by reference. Citigroups opinion was
limited solely to the fairness to Flextronics of the acquisition
consideration from a financial point of view as of the date of
the opinion. Neither Citigroups opinion nor the related
analyses constituted a recommendation of the proposed
acquisition to the Flextronics board of directors. Citigroup
makes no recommendation to any stockholder as to how you should
vote or act on any matters relating to the proposed acquisition.
Citigroup was not requested to consider, and its opinion does
not address, the relative merits of the acquisition compared to
any alternative business strategies that might exist for
Flextronics or the effect of any other transaction in which
Flextronics might engage. This summary of Citigroups
opinion is qualified in its entirety by reference to the full
text of the opinion. You are urged to read Citigroups
opinion carefully and in its entirety.
In arriving at its opinion, Citigroup:
reviewed a draft of the merger agreement, dated
June 3, 2007;
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held discussions with certain senior officers, directors and
other representatives and advisors of Flextronics and certain
senior officers and other representatives and advisors of
Solectron concerning the business, operations and prospects of
Flextronics and Solectron;
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examined certain publicly available business and financial
information relating to Flextronics and Solectron;
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examined certain financial forecasts and other information and
data relating to Flextronics and Solectron, which were provided
to or discussed with Citigroup by the management of Flextronics
and Solectron, including adjustments prepared by management of
Flextronics to the forecasts and other information and data
relating to Solectron, and including information relating to the
potential strategic implications and operational benefits
(including the amount, timing and achievability thereof)
anticipated by the management of each of Flextronics and
Solectron to result from the acquisition;
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51
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reviewed the financial terms of the acquisition as set forth in
the merger agreement in relation to, among other things: current
and historical market prices and trading volumes of Flextronics
ordinary shares and Solectron common stock; the historical and
projected earnings and other operating data of Flextronics and
Solectron; and the capitalization and financial condition of
Flextronics and Solectron;
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considered, to the extent publicly available, the financial
terms of certain other transactions and analyzed certain
financial, stock market and other publicly available information
relating to the businesses of other companies whose operations
Citigroup considered relevant or potentially relevant in
evaluating those of Flextronics and Solectron;
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evaluated certain potential pro forma financial effects of the
acquisition on Flextronics; and
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conducted such other analyses and examinations and considered
such other information and financial, economic and market
criteria as Citigroup deemed appropriate in arriving at its
opinion.
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In rendering its opinion, Citigroup assumed and relied, without
assuming any responsibility for independent verification, upon
the accuracy and completeness of all financial and other
information and data publicly available or provided to or
otherwise reviewed by or discussed with Citigroup and upon the
assurances of the management of each of Flextronics and
Solectron that they were not aware of any relevant information
that has been omitted or that remains undisclosed to Citigroup.
With respect to financial forecasts and other information and
data relating to Flextronics or Solectron (as adjusted by
management of Flextronics) provided to or otherwise reviewed by
or discussed with Citigroup, Citigroup was advised by the
management of Flextronics that such forecasts and other
information and data were reasonably prepared on basis
reflecting the best currently available estimates and judgments
of the management of Flextronics as to the future financial
performance of Flextronics and Solectron, the potential
strategic implications and operational benefits anticipated to
result from the acquisition, and the other matters covered
thereby. Citigroup assumed, with the Flextronics board of
directors consent, that the financial results (including
the potential strategic implications and operational benefits
anticipated to result from the acquisition) reflected in such
forecasts and other information and data will be realized in the
amounts and at the times projected.
Citigroup assumed, with the consent of the Flextronics board of
directors, that the acquisition will be consummated in
accordance with its terms, without waiver, modification or
amendment of any material term, condition or agreement and that,
in the course of obtaining the necessary regulatory or third
party approvals, consents and releases for the acquisition, no
delay, limitation, restriction or condition will be imposed that
would have an adverse effect on Flextronics, Solectron or the
contemplated benefits of the acquisition. Representatives of
Flextronics advised Citigroup, and Citigroup further assumed,
that the final terms of the merger agreement would not vary
materially from those set forth in the draft of the merger
agreement dated June 3, 2007 reviewed by Citigroup.
Citigroup did not express any opinion as to what the value of
the Flextronics ordinary shares actually will be when issued
pursuant to the acquisition or the price at which the
Flextronics ordinary shares will trade at any time. Citigroup
did not make and was not provided with an independent evaluation
or appraisal of the assets or liabilities (contingent or
otherwise) of Flextronics or Solectron, nor did Citigroup make
any physical inspection of the properties or assets of
Flextronics or Solectron. Further, Citigroup expressed no view
as to, and its opinion does not address, the relative merits of
the acquisition as compared to any alternative business
strategies that might exist for Flextronics or the effect of any
other transaction in which Flextronics might engage.
Citigroups opinion was necessarily based upon information
available to it, and financial, stock market and other
conditions and circumstances existing, as of the date of the
opinion.
A description of the material financial analyses performed by
Citigroup in connection with the preparation of its fairness
opinion is set forth below. The following summary does not,
however, purport to be a complete description of all the
financial analyses performed by Citigroup in connection with its
fairness opinion. The preparation of a fairness opinion is a
complex analytical process involving various determinations as
to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular
circumstances and is not necessarily susceptible to partial
analysis or summary description. In arriving at its fairness
determination, Citigroup considered the results of all of its
analyses and did not attribute any particular weight to any
factor or analysis considered by it. Rather, Citigroup made its
determination as to fairness on the basis of its
52
experience and professional judgment after considering the
results of all of its analyses. Accordingly, Citigroup believes
that the analyses and factors described below must be considered
as a whole and that selecting portions of such analyses and
factors or focusing on information presented in tabular format,
without considering all analyses and factors or the narrative
description of its analyses, could create a misleading or
incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Citigroup made numerous assumptions with
respect to industry performance, regulatory, general business,
economic, market and financial conditions and other matters,
many of which are beyond the control of Flextronics and
Solectron. No company, business or transaction used in
Citigroups analyses as a comparison is identical or
directly comparable to Flextronics or Solectron, and an
evaluation of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and
other factors that could affect the acquisition, public trading,
or other values of the companies, business segments or
transactions analyzed.
Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by those
analyses. The analyses do not purport to be appraisals or to
reflect the prices at which businesses or securities actually
may be sold. Because these analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
Flextronics, Solectron, Citigroup, their respective affiliates
or any other person assumes responsibility if future results are
materially different from those forecast.
The order of the analyses described does not represent relative
importance or weight given to those analyses by Citigroup. Some
of the summaries of the financial analyses include information
presented in tabular format. To the extent the following
quantitative information reflects market data, except as
otherwise indicated, Citigroup based this information on market
data existing on or before June 1, 2007, the last trading
day before public announcement of the acquisition. Accordingly,
this information does not necessarily reflect current or future
market conditions.
The acquisition consideration was determined by
arms-length negotiations between Flextronics and
Solectron, in consultation with their respective financial
advisors and other representatives, and was not established by
such financial advisors.
The following is a summary of the material financial analyses
presented to the Flextronics board of directors in connection
with Citigroups opinion. Citigroup believes that the
analyses and factors described below must be considered as a
whole and that selecting portions of such analyses and factors
or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative
description of its analyses, could create a misleading or
incomplete view of the processes underlying its analyses and
opinion.
Transaction
Overview
Citigroup reviewed the basic terms of the acquisition with the
Flextronics board of directors, including the following:
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consideration per share of Solectron common stock to consist of
$3.89 in cash or 0.345 Flextronics ordinary shares;
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cash conversion range of 30% to 50% of outstanding shares of
Solectron and stock conversion range of 50% to 70% of
outstanding shares of Solectron; and
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pro forma synergies of the combined company.
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Historical Exchange Ratio Analysis. Citigroup
calculated the implied current exchange ratio at May 31,
2007 by dividing the closing price per share of Solectron common
stock by the closing price per share of Flextronics ordinary
shares on such date. Citigroup also calculated the high, low and
average historical exchange ratios for the
53
30-day,
90-day,
180-day,
12-month and
2-year
periods, in each case ending May 31, 2007. The results of
this analysis are set forth below:
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High
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Low
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Average
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Current
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Last 30 days
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0.3135
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x
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0.2896
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x
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0.3013
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x
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0.2944
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x
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Last 90 days
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0.3135
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x
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0.2775
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x
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0.2915
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x
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0.2944
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x
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Last 180 days
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0.3135
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x
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0.2436
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x
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0.2864
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x
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0.2944
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x
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Last 12 months
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0.3389
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x
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0.2436
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x
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0.2879
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x
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0.2944
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x
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Last 2 years
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0.3985
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x
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0.2436
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x
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0.3086
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x
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0.2944
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x
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Analysis of Trading Multiples. Citigroup
derived certain trading multiples for each of Flextronics,
Solectron and selected Tier I EMS companies that Citigroup
deemed comparable to Flextronics and Solectron, and compared the
derived multiples to similar information for Solectron assuming
consummation of the acquisition at the transaction price of
$3.89 per share of Solectrons common stock. The trading
multiples considered by Citigroup in the course of this analysis
were:
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Firm value as multiple of estimated EBITDA for each of calendar
years 2007 and 2008; and
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Stock price per share as multiple of estimated earnings per
share, for each of calendar years 2007 and 2008.
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The comparable companies included Hon Hai, Jabil, Sanmina-SCI
and Celestica. Financial information and data for Flextronics,
Solectron, and the comparable companies were based on
information available in company filings, press releases, Wall
Street releases and Factset market data. Citigroup defined firm
value as equity value (all fully diluted shares at the stock
price less any option proceeds) plus straight debt, minority
interest, straight preferred stock, all out-of-the-money
convertibles, minus investments in unconsolidated affiliates and
cash. The results of this analysis were:
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Firm Value / EBITDA
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Price / EPS
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CY2007E
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CY2008E
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CY2007E
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CY2008E
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Tier I EMS Median
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8.1
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x
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7.1
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x
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21.9
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x
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12.8
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x
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Tier I EMS Mean
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8.3
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x
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6.7
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x
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19.9
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x
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13.5
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x
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Solectron @ Market ($3.40)
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6.2
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x
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5.4
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x
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15.3
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x
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12.7
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x
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Solectron @ Transaction ($3.89)
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7.3
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x
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6.3
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x
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17.5
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x
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14.6
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x
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Precedent Premiums. Citigroup reviewed
publicly available information for cash and stock consideration
transactions with deal values between $1.5 billion and
$5.0 billion since 2004. For each of these transactions,
Citigroup derived and compared with similar information for the
acquisition the per share premium or discount paid or proposed
to be paid to the target companys shareholders based on
the closing price per share of the target companys common
stock one day prior to the announcement of the transaction, and
the ten-day
and
thirty-day
average daily trading prices prior to the announcement of the
transaction. The results of this analysis were:
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Premium
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1-Day
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10-Day
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30-Day
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High
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79.1
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%
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74.1
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%
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59.9
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%
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Average
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19.4
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%
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20.9
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%
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21.3
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%
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Median
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16.6
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%
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18.1
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%
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20.2
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%
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Low
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(7.2
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)%
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(5.0
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)%
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(8.4
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)%
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Flextronics-Solectron
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14.4
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%
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15.3
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%
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13.8
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%
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Discounted Cash Flow Analyses. Citigroup
performed a discounted cash flow analysis to calculate the
estimated present value of the standalone unlevered, after-tax
free cash flows that Solectron could generate over the period
from fiscal years 2008 through 2014.
Citigroup calculated a range of estimated terminal values by
applying a range of EBITDA terminal value multiples of 5.00x to
7.00x to Solectrons estimated fiscal year 2014 terminal
EBITDA. The unlevered, after-tax free cash flows and terminal
values were discounted to present value as of March 31,
2007 using discount rates
54
ranging from 9.0% to 11.0%, which range was derived taking into
consideration, among other things, the estimated weighted
average cost of capital for Solectron using selected public
company market data and Solectrons cost of debt as of
March 31, 2007. The terminal value multiples were
determined based upon an assessment of public company trading
values. Using Solectrons estimated balance sheet data as
of March 2, 2007 as provided by Solectrons
management, this analysis indicated the following approximate
implied per share equity value reference range for Solectron, as
compared to the closing price of Solectron common stock on
May 31, 2007, one day before the last trading day prior to
the announcement of the acquisition:
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Implied Per Share Equity Value
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Solectron Stock Closing Price
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Reference Range for Solectron
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on May 31, 2007
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$3.66 - $4.33
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$3.40
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Citigroup also performed a discounted cash flow analysis to
calculate the estimated present value of the after-tax net
synergies that Flextronics and Solectron as a combined company
could generate over the period from 2008 through 2014. Assuming
a marginal tax rate of 7.0% and taking into account allowance
for potential revenue leakage, reduction in cost of goods sold
due to potential revenue leakage, cost of goods sold savings on
materials, manufacturing overhead savings, operating
expenditures savings, utilization profit improvement and
vertical integration, Citigroup estimated the present value of
the after-tax synergies of the combined company as of
March 31, 2007 at $649.9 million or $0.71 per share.
Other Factors. In rendering its opinion,
Citigroup also reviewed and considered other factors for
informational purposes, including:
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the pro forma business mix of Flextronics and Solectron, based
on company presentations, Flextronics last quarter annualized as
of March 31, 2007 and Solectrons last quarter
annualized as of March 2, 2007;
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Wall Street analyst price targets and projections for Solectron
found in publicly available equity research; and
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operating metrics, including revenue growth, of Solectron and
selected Tier I EMS firms. Estimates for the Tier I
EMS firms were based on company filings, press releases, Wall
Street releases and Factset market data.
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Based on the analyses described above, Citigroup determined that
the aggregate consideration to be paid by Flextronics in the
acquisition is fair, as of June 3, 2007, from a financial
point of view, to Flextronics.
Miscellaneous. Citigroup acted as financial
advisor to Flextronics in connection with the transaction.
Pursuant to Citigroups engagement, Flextronics agreed to
pay Citigroup $11 million upon consummation of the
acquisition of Solectron. If Citigroups engagement is
terminated or expires prior to the consummation of the
acquisition, the foregoing fee will be payable by Flextronics if
the acquisition of Solectron is consummated at any time prior to
the twelve-month anniversary of the termination or expiration of
Citigroups engagement. Flextronics has also agreed,
subject to certain limitations, to reimburse Citigroup for its
reasonable travel and other expenses, including attorneys
fees and expenses, and to indemnify Citigroup and related
parties for certain liabilities that may arise out of the
rendering of its opinion, including certain liabilities under
federal securities laws. Finally, an affiliate of Citigroup
engaged in the commercial lending business may act as lender and
administrative agent for a credit facility to be used by
Flextronics in connection with the acquisition.
Citigroup and its affiliates in the past have provided, and are
currently providing, services to Flextronics and Solectron
unrelated to the acquisition, for which services Citigroup and
such affiliates have received and expect to receive
compensation. These services include, without limitation, acting
as a lender to Flextronics under Flextronicss May 2007
credit facility, or the 2007 facility, and as a co-documentation
agent under Flextronicss May 2005 credit facility which
was replaced by the 2007 facility, advising Flextronics in
connection with a February 2006 delisting of a subsidiary,
acting as joint book runner of Solectrons February 2006
$150 million bond offering and acting as co-syndication
agent of Solectrons August 2006 $350 million senior
secured revolving credit facility. In the ordinary course of
Citigroups business, Citigroup and its affiliates may
actively trade or hold the securities of Flextronics and
Solectron for their own account or for the account of their
customers and, accordingly, may at any time hold a long or short
position in such securities. In addition, Citigroup and its
affiliates (including
55
Citigroup Inc. and its affiliates) may maintain relationships
with Flextronics, Solectron and their respective affiliates.
Flextronics selected Citigroup as its financial advisor in
connection with the acquisition based on Citigroups
reputation, experience and familiarity with Flextronics,
Solectron and their respective businesses. Citigroup is an
internationally recognized investment banking firm which
regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other
purposes.
Solectrons
Reasons for the Merger and Board Recommendation
At a meeting held on June 3, 2007, the Solectron board of
directors, by unanimous vote:
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determined that the merger agreement and the transactions
contemplated by the merger agreement are advisable and fair to
and in the best interests of the Solectron stockholders and
approved and adopted the merger agreement and the transactions
contemplated thereby; and
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resolved to recommend that the Solectron stockholders adopt the
merger agreement.
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The Solectron board of directors unanimously recommends that the
Solectron stockholders vote FOR the adoption of the
merger agreement at the Solectron special meeting.
In reaching this decision, the Solectron board of directors
consulted with Solectrons management and its financial and
legal advisors and considered a variety of factors, including
the material factors described below. In light of the number and
wide variety of factors considered in connection with its
evaluation of the transaction, the Solectron board of directors
did not consider it practicable to, and did not attempt to,
quantify or otherwise assign relative weights to the specific
factors that it considered in reaching its determination.
Rather, the Solectron board of directors made its recommendation
based on the totality of information presented to, and the
investigations conducted by or at the direction of, the
Solectron board of directors, which included, but was not
limited to:
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historical information concerning Flextronicss and
Solectrons respective businesses, prospects, financial
performance and condition, operations, technology, management
and competitive position, including public reports concerning
results of operations for each company, as filed with the SEC;
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Solectron managements view of the financial condition,
results of operations and businesses of Flextronics and
Solectron before and after giving effect to the merger
(including Solectrons prospects continuing as an
independent company); and
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reports from Solectron management and outside legal, financial
and accounting advisers as to the results of the due diligence
investigation of Flextronics.
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In addition, individual directors may have given different
weightings to different factors.
Strategic Considerations. The Solectron board
of directors considered factors pertaining to the strategic
rationale for the merger as generally supporting its decision to
enter into the merger agreement, including, but not limited to,
the following:
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its expectation that the merger would result in a larger, more
competitive organization, and that the opportunities for
strategic investment and customer expansion following the merger
would be significantly greater for the combined company than
what Solectron could achieve as an independent company;
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its expectation that the complementary capabilities of Solectron
and Flextronics would enhance the range of the services and
solutions currently offered by Solectron to its customers and
would allow the combined company to pursue new growth
opportunities; and
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the strategic benefits of the merger, as described in the
sections entitled Flextronicss Reasons for the
Merger and Board Recommendation beginning on page 49
and Solectrons Reasons for the Merger and Board
Recommendation beginning on page 56 of this joint
proxy statement/prospectus.
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56
Equity Participation in Combined Company. The
Solectron board of directors considered as generally supporting
its decision to enter into the merger agreement the opportunity
for Solectron stockholders (through the stock election feature)
to participate in the potential growth of the combined company
as compared to the alternative of Solectron continuing as an
independent company under its current business plan in light of
the perceived strategic benefits of the proposed transaction, as
well as a perceived reduction in risk as a result of being
stockholders in a larger, more diversified company.
Financial Considerations. The Solectron board
of directors considered the financial terms of the transaction,
including the cash/stock election feature, the fixed exchange
ratio of 0.3450 Flextronics ordinary shares for each share of
Solectron common stock (for stock elections) and the $3.89 in
cash for each share of Solectron common stock (for cash
elections), as well as other financial factors pertaining to the
merger as generally supporting its decision to enter into the
merger agreement, including, but not limited to, the following:
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the fact that the implied value of the merger consideration,
based on the closing price of Flextronics ordinary shares on
June 1, 2007 (the last trading day prior to announcement of
the merger) represented a premium of 15.0% (for cash elections)
and 20.0% (for stock elections) to the closing price of
Solectron common stock on such date, a 14.2% (for cash
elections) and 18.6% (for stock elections) premium to the
20-day
average closing price of Solectron common stock and a
substantial premium over other recent historical periods;
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the stock election feature of the transaction offers Solectron
stockholders the opportunity to participate in the growth and
success of the combined company through the stock component of
the merger consideration, subject to the aggregate stock
consideration cap;
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the cash election feature of the transaction allows Solectron
stockholders to realize an immediate return on their investment
in Solectron common stock through the cash component of the
merger consideration, subject to the aggregate cash cap;
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the significant synergies that could result from the
transaction, including substantial cost savings for the combined
company from increased efficiencies in manufacturing, logistics
and operating expenses;
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the expectation that, immediately after closing and depending on
the aggregate amount of cash consideration that Solectron
stockholders elect to receive pursuant to the merger and based
on the number of Flextronics ordinary shares and shares of
Solectron common stock outstanding on June 1, 2007,
including Solectron restricted shares and the exchangeable
shares, Solectron stockholders would beneficially own
approximately 21% to 27% of the ordinary shares of the combined
company, and would have the opportunity to share in the future
growth and expected synergies of the combined company while
retaining the flexibility to sell all or a portion of those
shares at any time.
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Opinion of Goldman, Sachs & Co. The
Solectron board of directors considered Goldman Sachs oral
opinion rendered to Solectrons board of directors on
June 3, 2007 and subsequently confirmed in writing on
June 4, 2007, that, as of the date of its opinion and based
upon and subject to the factors and assumptions set forth in the
opinion, the 0.3450 of a Flextronics ordinary share and the
$3.89 in cash, without interest, to be received by the holders
of Solectron common stock for each share of Solectron common
stock at the election of the holder of such share, taken in the
aggregate, was fair from a financial point of view to the
holders of Solectron common stock.
Terms of Merger Agreement. The Solectron board
of directors considered as generally supporting its decision to
approve the Companys entry into the merger agreement the
terms of such agreement, including the following:
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the belief that the terms of the merger agreement, including the
parties mutual representations, warranties, covenants and
closing conditions, are reasonable and that the prospects for
successful consummation of the transaction are high;
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the limited ability of Flextronics to terminate the merger
agreement, and the fees payable by Flextronics with respect to
certain events of termination, namely the payment of a
$100.0 million termination fee to Solectron in certain
circumstances where the merger agreement is terminated, although
the Solectron board of directors understood that such
limitations and similar fees would also apply to Solectron;
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the fact that while the merger agreement contains a covenant
prohibiting Solectron from soliciting third party acquisition
proposals, it allows a reasonable opportunity to respond to
unsolicited superior third party acquisition proposals if the
Solectron board of directors determines that the failure to do
so would reasonably be expected to be a breach of its fiduciary
duties under applicable law, subject to the payment of a
termination fee upon termination under certain circumstances;
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its view that the terms of the merger agreement, including the
termination fee, would not preclude a proposal for an
alternative acquisition transaction involving Solectron;
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the fact that the merger agreement allows the Solectron board of
directors to withhold, withdraw, amend or modify its
recommendation of the merger agreement if a superior proposal is
received from a third party or if the Solectron board of
directors determines that the failure to withhold, withdraw,
amend or modify its recommendation would reasonably be expected
to be a breach of its fiduciary duties under applicable law,
subject to the payment of a termination fee upon termination
under certain circumstances;
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the governance arrangements of the combined company under which
the board of directors of the combined company would include two
directors designated by Solectron, subject to the approval of
Flextronics;
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the fact that, as of and following the closing date, the
surviving corporation will either (a) maintain
Solectrons benefit plans (other than Solectrons
401(k) plans, unless Flextronics otherwise notifies Solectron
that such plans will not be terminated immediately prior to the
closing date), or (b) permit each continuing employee of
Solectron and its subsidiaries employed immediately prior to the
effective time (and, as applicable, their eligible dependents)
to participate in the Flextronics benefit plans (on terms no
less favorable than those provided to similarly situated
Flextronics employees), in which case, such employees will
receive credit for prior service with Solectron and its
subsidiaries, including predecessor employers, for certain
purposes, or (c) a combination of (a) and (b).
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Risks. The Solectron board of directors also
identified and considered a number of uncertainties, risks and
other potentially negative factors, including the following:
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the price of Flextronics ordinary shares at the time of closing
could be lower than the price as of the time of signing, and
accordingly, the value of the stock consideration received by
Solectron stockholders in the merger could be materially less
than the value as of the date of the merger agreement;
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the difficulties and challenges inherent in completing a merger
and integrating the management teams, strategies, cultures and
organizations of the two companies;
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the risk that the expected synergies and other benefits of the
merger might not be fully achieved or may not be achieved within
the timeframes expected;
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the risks of the type and nature described above under
Risk Factors;
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if Solectron stockholders collectively elect to receive cash
consideration in excess of the aggregate cash cap, the cash
consideration that the Solectron stockholders will receive will
be proportionally reduced and substituted with Flextronics
ordinary shares pursuant to the terms of the merger agreement,
which will result in those stockholders who elect cash not
receiving the exact form of merger consideration they elected;
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if Solectron stockholders collectively elect to receive stock
consideration in excess of the aggregate stock cap, the stock
consideration that the Solectron stockholders will receive will
be proportionally reduced and substituted with cash pursuant to
the terms of the merger agreement, which will result in those
stockholders who elect stock not receiving the exact form of
merger consideration they elected;
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the possibility that the merger ultimately may not be completed,
whether as a result of material adverse developments, regulatory
objections or other unsatisfied closing conditions;
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the potential adverse effects of the announcement and pendency
of the merger on Solectrons customer, supplier and
employee relationships, including the potential decrease or loss
of customer business;
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the decision of Solectrons board of directors to pursue
the proposed strategic merger without soliciting competing
proposals from other parties (though the structure of the merger
agreement allows Solectrons
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board of directors to consider alternative third party
acquisition proposals if Solectrons board of directors
determines in good faith that an alternative third party
acquisition proposal is or is reasonably likely to result in an
acquisition proposal that is more favorable to the Solectron
stockholders);
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certain provisions of the merger agreement may have the effect
of discouraging proposals for alternative acquisition
transactions involving Solectron, including:
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the restriction on Solectrons ability to solicit proposals
for alternative transactions;
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the requirement that the Solectron board of directors submit the
merger agreement to the Solectron stockholders for approval and
adoption in certain circumstances, even if the Solectron board
of directors withholds, withdraws, amends or modifies its
recommendation for the merger; and
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the requirement that Solectron pay a termination fee of
$100.0 million to Flextronics in certain circumstances
following the termination of the merger agreement;
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certain of Solectrons directors and officers may have
interests in the merger as individuals that are in addition to,
or that may be different from, the interests of the Solectron
stockholders, as further described in the section entitled
The Merger Interests of Solectrons
Officers and Directors in the Merger beginning on
page 67 of this joint proxy statement/prospectus;
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the fees and expenses associated with completing the merger;
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the risk that certain members of Solectron senior management or
Flextronics senior management might choose not to remain
employed with the combined company;
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the risk that either the Solectron stockholders may fail to
adopt the merger agreement or the Flextronics shareholders may
fail to approve the issuance of the Flextronics ordinary shares
in the merger;
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the potential impact of the restrictions under the merger
agreement on Solectrons ability to take certain actions
during the period prior to the closing of the merger (which may
delay or prevent Solectron from undertaking business
opportunities that may arise pending completion of the
merger); and
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the potential for diversion of management and employee attention
and for increased employee attrition during the period prior to
the closing of the merger agreement, and the potential effect
that these may have on Solectrons business and relations
with customers and suppliers.
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The Solectron board of directors weighed the potential benefits,
advantages and opportunities of a merger and the risks of not
pursuing a transaction with Flextronics against the risks and
challenges inherent in the proposed merger. The Solectron board
of directors realized that there can be no assurance about
future results, including results expected or considered in the
factors listed above. However, the Solectron board of directors
concluded that the potential benefits outweighed the risks of
consummating the merger with Flextronics.
Solectrons Reasons for the Merger. The
board of directors and management team of Solectron believe that
the proposed merger represents the best strategic alternative
for delivering increased value to Solectrons stockholders.
Solectron believes the merger presents a unique opportunity to
create a combined entity that will offer its customers a broader
set of electronics manufacturing services (or EMS) and original
design manufacturing (or ODM) solutions on a scale and with an
increased global reach that should deliver significant benefits
to Solectrons customers, stockholders and employees. The
Solectron board of directors and management team reviewed
various strategic alternatives to address the risks and
challenges that Solectron faces, including, but not limited to,
being acquired by EMS companies other than Flextronics,
acquiring other third parties or other capabilities, undertaking
a leveraged buy-out of Solectron or continuing as a standalone
company. See the section entitled Background of the
Merger beginning on page 44 of this joint proxy
statement/prospectus. After reviewing and deliberating on the
merits and drawbacks of the various strategic alternatives and
the opportunities for the combined company presented by the
merger, as more fully described below, the Solectron board of
directors determined to pursue the merger with Flextronics in
lieu of the other alternatives because it believes the merger
will create a combined
59
company that will be better positioned than a standalone
Solectron to achieve the strategic and financial benefits
described below.
The Solectron board of directors identified the following
anticipated strategic and financial benefits of the merger:
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Complementary Businesses. The development,
manufacturing and logistics capabilities of the two companies
are complementary and should enable the combined company to
compete more effectively in the general EMS market. The combined
company should be stronger than either company on its own, with
greater breadth and depth of service offerings and with the
scale and anticipated operational efficiencies that should allow
it to profitably compete. In addition, Flextronicss ODM
capabilities, its vertical integration model, and its continued
targeting of non-traditional EMS market segments (e.g.,
automotive, military/aerospace, industrial and medical) should
allow the combined company to compete effectively in these
market segments, which offer greater growth potential and higher
margins than the traditional EMS market segments that comprise
Solectrons core business. Lastly, the integration of the
Solectron and Flextronics logistics networks with these
manufacturing facilities should create a more flexible and
responsive organization that can more quickly react to and
address regional and local changes in market demand and customer
expectations and preferences in the various market throughout
the world.
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Customers. The combined company should be able
to deepen relationships with many of its existing customers.
Solectron expects the combined company to improve its ability to
expand its current customer relationships and expects to
increase its penetration of new customer accounts. Solectron
believes that the combination of the two companies design,
engineering, manufacturing and logistics capabilities should
enable the combined company to meet customer needs more
effectively and, particularly with the vertical integration
model that Flextronics has been pursuing, to deliver more
complete solutions to customers at a lower cost to those
customers while realizing improved margins for the combined
company. In addition, Solectron believes the larger sales
organization, greater marketing resources and financial strength
of the combined company may lead to improved opportunities for
marketing the combined companys offerings.
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Reduction in Operating Costs. The combined
company is expected to realize substantial cost savings as a
result of increased efficiencies in manufacturing, logistics and
operating expenses. Flextronics and Solectron expect the
combined company to achieve benefits from cost savings from
manufacturing and operating expense reductions resulting from
global footprint rationalization and the elimination of
redundant assets or unnecessary functions; leveraging increased
scale and purchasing power; and the expansion of vertical
integration capabilities within the Solectron customer base.
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Stronger Financial Position. The combined
company will have greater scale and financial resources,
including total cash and cash equivalents. Flextronics and
Solectron expect that this stronger financial position will
improve the combined companys ability to support the
combined companys strategy; to respond more quickly and
effectively to customer needs, technological change, increased
competition and shifting market demand; and to pursue strategic
growth opportunities in the future, including acquisitions.
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Stock-for-Stock with Fixed Exchange Ratio for Stockholders
that Elect Stock. Solectrons stockholders
who receive Flextronics ordinary shares in the merger will share
in the benefits from the growth opportunities, synergies and
cost savings that are expected to be realized by the combined
company as a result of the merger. The fact that the stock
consideration is based on a fixed exchange ratio provides
certainty as to the number of Flextronics ordinary shares that
will be issued to Solectron stockholders who receive Flextronics
ordinary shares in the merger.
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There can be no assurance that the anticipated strategic and
financial benefits of the merger will be achieved, including
that the anticipated cost savings resulting from the merger will
be achieved
and/or
reflected in the trading price of Flextronics ordinary shares
following the completion of the merger.
After careful consideration, the Solectron board of directors
unanimously determined that the merger agreement and the
transactions contemplated by the merger agreement, including the
merger, are advisable and fair to and in the best interests of
the Solectron stockholders and has unanimously approved the
merger agreement.
60
The Solectron board of directors unanimously recommends that the
Solectron stockholders vote FOR the adoption of the
merger agreement.
Opinion
of Solectrons Financial Advisor
Goldman Sachs rendered its oral opinion to Solectrons
board of directors on June 3, 2007, which it subsequently
confirmed in writing on June 4, 2007, that, as of the dates
of such opinions, and based upon and subject to the factors and
assumptions set forth therein, the Stock Consideration (as
defined in the opinion) and the Cash Consideration (as defined
in the opinion) to be received by the holders of Shares (as
defined in the opinion), taken in the aggregate, was fair from a
financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated
June 4, 2007, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as
Annex E. Goldman Sachs provided its opinion for the
information and assistance of Solectrons board of
directors in connection with its consideration of the
transaction. The Goldman Sachs opinion does not constitute a
recommendation as to how any holder of Solectrons common
stock should vote or make any election with respect to the
transaction or any other matter.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
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the merger agreement;
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annual reports to stockholders and Annual Reports on Form
10-K of
Solectron for the five fiscal years ended August 31, 2006
and of Flextronics for the five fiscal years ended
March 31, 2007;
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certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of Solectron and Flextronics;
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certain other communications from Solectron and Flextronics to
their respective stockholders;
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certain internal financial analyses and forecasts for Solectron
prepared by its management; and
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certain internal financial analyses and forecasts for
Flextronics prepared by its management, as reviewed and approved
for Goldman Sachs use by the management of Solectron,
referred to in this joint proxy statement/prospectus as the
Forecasts, and certain cost savings and operating synergies
projected by the management of Solectron to result from the
transaction, referred to in this joint proxy
statement/prospectus as the Synergies.
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Goldman Sachs also held discussions with members of the senior
managements of Solectron and Flextronics regarding their
assessment of the strategic rationale for, and the potential
benefits of, the transaction and the past and current business
operations, financial condition and future prospects of their
respective companies, including Solectrons views with
respect to the risks and uncertainties associated with Solectron
achieving its forecasts. In addition, Goldman Sachs reviewed the
reported price and trading activity for the Solectron common
stock and for the ordinary shares, no par value, of Flextronics,
compared certain financial and stock market information for
Solectron and Flextronics with similar information for certain
other companies the securities of which are publicly traded,
reviewed the financial terms of certain recent business
combinations in the electronic manufacturing services industry
specifically and in other industries generally and performed
such other studies and analyses, and considered such other
factors, as it considered appropriate.
For purposes of rendering its opinion, Goldman Sachs relied upon
and assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, accounting, legal, tax and other information
discussed with or reviewed by it. In that regard, Goldman Sachs
assumed with Solectrons consent that the Forecasts,
including the Synergies, had been reasonably prepared and
reflected the best currently available estimates and judgments
of the managements of Solectron and Flextronics, as the case may
be, and that the Synergies would be realized. Goldman Sachs also
assumed that all governmental, regulatory or other consents and
approvals necessary for the consummation of the transaction
contemplated by the merger agreement would be obtained without
any adverse effect on Solectron or Flextronics or on the
expected benefits of the transaction in any way meaningful to
its analysis. Goldman Sachs was not requested to solicit, and
did not solicit, interest from other
61
parties with respect to an acquisition of or other business
combination with Solectron. In addition, Goldman Sachs did not
make an independent evaluation or appraisal of the assets and
liabilities (including any contingent, derivative or
off-balance-sheet assets and liabilities) of Solectron or
Flextronics or any of their respective subsidiaries, nor was any
evaluation or appraisal of the assets or liabilities of
Solectron or Flextronics or any of their respective subsidiaries
furnished to Goldman Sachs. Goldman Sachs opinion is
necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available
to it as of, June 4, 2007. Goldman Sachs opinion did
not address the underlying business decision of Solectron to
engage in the transaction or the relative merits of the
transaction as compared to any alternative business strategies
or transactions that might be available to Solectron nor did
Goldman Sachs express any opinion as to the prices at which
Flextronics ordinary shares would trade at any time.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to the board of directors of
Solectron in connection with rendering the opinion described
above. The following summary, however, does not purport to be a
complete description of the financial analyses performed by
Goldman Sachs, nor does the order of analyses described
represent relative importance or weight given to those analyses
by Goldman Sachs. Some of the summaries of the financial
analyses include information presented in tabular format. The
tables must be read together with the full text of each summary
and are alone not a complete description of Goldman Sachs
financial analyses. Except as otherwise noted, the following
quantitative information, to the extent that it is based on
market data, is based on market data as it existed on or before
June 4, 2007 and is not necessarily indicative of current
market conditions.
Historical Stock Trading and Historical Exchange Ratio
Analysis. Goldman Sachs reviewed the historical
trading prices and volumes for the Solectron common stock for
the one-year period ended June 1, 2007. In addition,
Goldman Sachs analyzed the consideration to be received by
holders of Solectron common stock electing to receive the Cash
Consideration pursuant to the merger agreement in relation to
the closing price of the Solectron common stock on June 1,
2007 and the average market prices over the
10-day,
20-day,
three-month, six-month and one-year periods ended June 1,
2007.
This analysis indicated that the price per share to be paid to
Solectron stockholders electing to receive the Cash
Consideration pursuant to the merger agreement represented:
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a premium of 15.4% based on the closing market price of $3.37
per share as of June 1, 2007;
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a premium of 15.1% based on the
10-day
average market price of $3.38 per share;
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a premium of 14.2% based on the
20-day
average market price of $3.40 per share;
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a premium of 18.6% based on the three-month average market price
of $3.28 per share;
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a premium of 17.7% based on the six-month average market price
of $3.30 per share; and
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a premium of 18.4% based on the one-year average market price of
$3.28 per share.
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Goldman Sachs calculated the implied current exchange ratio as
of June 1, 2007 by dividing the closing price per share of
Solectron common stock by the closing price per share of
Flextronics ordinary shares. Goldman Sachs also calculated the
historical exchange ratios and implied premium for Solectron
common stock for the
10-day,
20-day,
three-month, six-month and one-year periods ended June 1,
2007. Goldman Sachs compared these ratios to the exchange ratio
in the merger agreement of 0.3450x for Solectron stockholders
electing to receive the Stock Consideration.
This analysis indicated that the exchange ratio in the merger
agreement for Solectron stockholders electing to receive the
Stock Consideration represented:
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a premium of 19.8% based on the exchange ratio of 0.2880x
calculated as of June 1, 2007;
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a premium of 15.7% based on the
10-day
average exchange ratio of 0.2981x;
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a premium of 15.5% based on the
20-day
average exchange ratio of 0.2987x;
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a premium of 17.8% based on the three-month average exchange
ratio of 0.2930x;
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a premium of 18.9% based on the six-month average exchange ratio
of 0.2901x; and
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a premium of 19.9% based on the one-year average exchange ratio
of 0.2877x.
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Selected Companies Analysis. Goldman Sachs
calculated and compared the ratios of: (1) enterprise value
to the estimated calendar year 2007 sales and to the estimated
calendar year 2008 sales; (2) price per share to the
estimated calendar year 2007 earnings per share and to the
estimated calendar year 2008 earnings per share; and
(3) estimated calendar year 2008 price to earnings multiple
to the estimated long-term growth rate per share, in the case of
each of Solectron, Flextronics and the selected companies listed
below, based on financial data as of June 1, 2007,
information obtained from SEC filings and estimates provided by
the Institutional Brokers Estimate System (a data service
that compiles estimates issued by securities analysts), or IBES,
for the selected companies and for Solectron and Flextronics and
based on the closing price of Solectrons common stock as
of June 1, 2007. The list of the selected companies is as
follows:
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Selected Large Cap
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Selected Small and Mid Cap
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Electronic Manufacturing
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Electronic Manufacturing
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Services Companies
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Services Companies
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Celestica Inc.
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Benchmark Electronics,
Inc.
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Flextronics
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LaBarge, Inc.
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Hon Hai Precision
Industry Co., Ltd.
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Plexus Corp.
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Jabil Circuit, Inc.
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Sypris Solutions, Inc.
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Sanmina-SCI Corporation
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Solectron
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Although none of the other selected companies is directly
comparable to Solectron or Flextronics, the companies included
were chosen because they are publicly traded companies with
operations that for purposes of analysis may be considered
similar to certain operations of Solectron and Flextronics. The
results of these analyses are summarized as follows:
Selected
Large Cap Electronic Manufacturing Services Companies
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PE/
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Enterprise Value/
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Growth
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Sales Multiples
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Price/Earnings Multiples
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Multiples
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Estimated
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Estimated
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Estimated
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Estimated
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Estimated
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Selected Company
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CY2007
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CY2008
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CY2007
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CY2008
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CY2008
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Celestica Inc.
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0.2
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x
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0.2
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x
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51.1
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x
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13.3
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x
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0.9
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x
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Flextronics
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0.4
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x
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0.3
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x
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12.9
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x
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11.0
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x
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0.5
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x
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Hon Hai Precision Industry Co.,
Ltd.
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0.6
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x
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0.5
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x
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14.5
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x
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11.1
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x
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0.6
|
x
|
Jabil Circuit, Inc.
|
|
|
0.4
|
x
|
|
|
0.4
|
x
|
|
|
19.9
|
x
|
|
|
13.1
|
x
|
|
|
0.6
|
x
|
Sanmina-SCI Corporation
|
|
|
0.3
|
x
|
|
|
0.3
|
x
|
|
|
22.0
|
x
|
|
|
13.5
|
x
|
|
|
1.3
|
x
|
Solectron
|
|
|
0.2
|
x
|
|
|
0.2
|
x
|
|
|
14.5
|
x
|
|
|
12.1
|
x
|
|
|
0.8
|
x
|
Mean
|
|
|
0.4
|
x
|
|
|
0.3
|
x
|
|
|
22.5
|
x
|
|
|
12.3
|
x
|
|
|
0.8
|
x
|
Median
|
|
|
0.3
|
x
|
|
|
0.3
|
x
|
|
|
17.2
|
x
|
|
|
12.6
|
x
|
|
|
0.7
|
x
|
Sources: Latest publicly available financial statements.
All projected sales, EBITDA and EPS estimates were calendarized.
All projected sales, EBITDA and EPS based on IBES median
estimates and Wall Street estimates for Solectron, Flextronics
and Hon Hai Precision Industry Co., Ltd.
63
Selected
Small and Mid Cap Electronic Manufacturing Services
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PE/
|
|
|
|
Enterprise Value/
|
|
|
Price/Earnings
|
|
|
Growth
|
|
|
|
Sales Multiples
|
|
|
Multiples
|
|
|
Multiples
|
|
|
|
Estimated
|
|
|
Estimated
|
|
|
Estimated
|
|
|
Estimated
|
|
|
Estimated
|
|
Selected Company
|
|
CY2007
|
|
|
CY2008
|
|
|
CY2007
|
|
|
CY2008
|
|
|
CY2008
|
|
|
Benchmark Electronics, Inc.
|
|
|
0.4
|
x
|
|
|
0.4
|
x
|
|
|
13.3
|
x
|
|
|
11.5
|
x
|
|
|
0.7
|
x
|
LaBarge, Inc.
|
|
|
1.0
|
x
|
|
|
1.0
|
x
|
|
|
17.4
|
x
|
|
|
16.4
|
x
|
|
|
NA
|
|
Plexus Corp.
|
|
|
0.6
|
x
|
|
|
0.5
|
x
|
|
|
17.1
|
x
|
|
|
15.0
|
x
|
|
|
0.8
|
x
|
Sypris Solutions, Inc.
|
|
|
0.4
|
x
|
|
|
0.4
|
x
|
|
|
NM(1
|
)
|
|
|
28.4
|
x
|
|
|
NA
|
|
Mean
|
|
|
0.6
|
x
|
|
|
0.6
|
x
|
|
|
15.9
|
x
|
|
|
17.9
|
x
|
|
|
0.8
|
x
|
Median
|
|
|
0.5
|
x
|
|
|
0.5
|
x
|
|
|
17.1
|
x
|
|
|
15.7
|
x
|
|
|
0.8
|
x
|
Sources: Latest publicly available financial statements.
All projected sales, EBITDA and EPS estimates were calendarized.
All projected sales, EBITDA and EPS based on IBES median
estimates and Wall Street estimates for Solectron, Flextronics
and Hon Hai Precision Industry Co., Ltd.
Illustrative Present Value of Hypothetical Future Share Price
Analysis. Goldman Sachs performed an illustrative
analysis of the implied present value of the hypothetical future
price per share of common stock of Solectron, which is designed
to provide an indication of the present value of a hypothetical
future value of a companys equity as a function of such
companys estimated future earnings and its assumed price
to future earnings per share multiple. For certain analyses it
performed, Goldman Sachs used financial projections for
Solectron prepared by Solectrons management for each of
the calendar years 2007 to 2011, referred to in this joint proxy
statement/prospectus as the 3% Margin Case. For this analysis,
Goldman Sachs used financial projections for calendar year 2009
from the 3% Margin Case. Goldman Sachs first calculated the
implied values per share as of June 1, 2007 for calendar
year 2009 by applying price to forward earnings per share
multiples of 11.0x to 13.0x to earnings per share of Solectron
common stock estimates for calendar year 2009, and then
discounted the 2009 values back one year, using discount rates
ranging from 12.0% to 16.0%. This analysis resulted in a range
of implied present values of $3.61 to $4.44 per share of
Solectron common stock.
Goldman Sachs also performed the same analysis using other
financial projections for Solectron prepared by Solectrons
management for each of the calendar years 2007 to 2011, referred
to in this joint proxy statement/prospectus as the Target Case,
and estimates for Solectron based on Wall Street research for
the calendar years 2007 through 2009 with constant revenue
growth thereafter through calendar year 2011, referred to in
this joint proxy statement/prospectus as the Wall Street
Estimates. These analyses resulted in a range of implied present
values of $4.67 to $5.74 per share of Solectron common stock for
the Target Case and $3.15 to $3.88 per share of Solectron common
stock for the Wall Street Estimates.
Discounted Cash Flow Analysis. Goldman Sachs
performed an illustrative discounted cash flow analysis to
determine a range of implied present values per share of
Solectron common stock based on the 3% Margin Case. All cash
flows were discounted to March 2, 2007, with mid-year
discounting, and terminal values were based upon a perpetuity
growth rate for cash flows for calendar years 2012 and beyond.
In performing the illustrative discounted cash flow analysis,
Goldman Sachs applied discount rates ranging from 12.0% to 16.0%
to the projected cash flows of Solectron for March 2007 through
December 2007 and calendar years 2008 to 2011. Goldman Sachs
also applied perpetuity growth rates ranging from 2.0% to 6.0%.
This analysis resulted in a range of implied present values of
$2.97 to $5.45 per share of Solectron common stock.
Goldman Sachs also performed the same analysis using the Target
Case and the Wall Street Estimates. These analyses resulted in a
range of implied present values of $4.09 to $8.07 per share of
Solectron common stock for the Target Case and $2.72 to $4.86
per share of Solectron common stock for the Wall Street
Estimates.
Pro Forma Stockholder Value Analyses. Goldman
Sachs prepared certain illustrative pro forma analyses of the
potential financial impact of the transaction for the combined
company, taking into account the Synergies, based on the 3%
Margin Case. For these analyses, Goldman Sachs used financial
projections for Flextronics prepared by
64
its management, as viewed by Solectrons management, for
each of the calendar years 2007 to 2011. Goldman Sachs performed
these analyses using a 70% stock and 30% cash consideration
scenario.
Goldman Sachs performed an illustrative discounted cash flow
analysis for the combined company to determine a range of
implied potential values to be received by holders of Solectron
common stock, taking into account the Synergies, based on the 3%
Margin Case. All cash flows were discounted to March 2,
2007, with mid-year discounting, and terminal values were based
upon a perpetuity growth rate for cash flows for calendar years
2012 and beyond. In performing the illustrative discounted cash
flow analysis, Goldman Sachs applied discount rates ranging from
12.0% to 16.0% to the projected cash flows of the combined
company for March 2007 through December 2007 and calendar years
2008 to 2011. Goldman Sachs also applied perpetuity growth rates
ranging from 2.0% to 6.0%. The implied potential value to be
received by holders of Solectron common stock was then
calculated by adding a cash component per share calculated using
the price per share to be paid to Solectron stockholders
electing to receive the Cash Consideration to an equity value
per share calculated using the exchange ratio in the merger
agreement against the implied value per share for the combined
company, with each component weighted based on a 70% stock and
30% cash consideration scenario. This analysis resulted in a
range of implied present values of $3.95 to $8.00 per share of
Solectron common stock.
Goldman Sachs also performed the illustrative discounted cash
flow analysis for the combined company based on the Target Case
and the Wall Street Estimates, in each case, taking into account
the Synergies. For the Target Case, Goldman Sachs used financial
projections for Flextronics prepared by its management, as
viewed by Solectrons management, for each of the calendar
years 2007 to 2011. For the Wall Street Estimates, Goldman Sachs
used estimates for Flextronics based on Wall Street research for
each of the fiscal years 2007 to 2009 with constant revenue
growth thereafter through fiscal year 2012; for purposes of
comparability with the Solectron financial estimates, these
estimates were then calendarized. These analyses resulted in a
range of implied present values of $4.25 to $8.69 per share of
Solectron common stock for the Target Case and $3.90 to $7.49
per share of Solectron common stock for the Wall Street
Estimates.
Goldman Sachs also performed an illustrative analysis of the
implied potential value to be received by holders of Solectron
common stock, based on an illustrative analysis of the implied
present value of the hypothetical future price per share of
common stock of the combined company, taking into account the
Synergies, based on the 3% Margin Case. Goldman Sachs first
calculated the implied values per share as of June 1, 2007
for calendar year 2009 by applying price to forward earnings per
share multiples of 11.0x to 13.0x to estimated earnings per
share of the combined companys common stock estimates for
calendar year 2009, and then discounted the 2009 values back one
year, using discount rates ranging from 12.0% to 16.0%. The
implied potential value to be received by holders of Solectron
common stock was then calculated by adding a cash component per
share calculated using the price per share to be paid to
Solectron stockholders electing to receive the Cash
Consideration to an equity value per share calculated using the
exchange ratio in the merger agreement against the estimated
hypothetical future price per share of common stock of the
combined company, with each component weighted based on a 70%
stock and 30% cash consideration scenario. This analysis
resulted in a range of implied present values of $4.86 to $5.69
per share of Solectron common stock.
Goldman Sachs also performed the illustrative analysis of the
implied hypothetical present value of the future per share
common stock price of Solectron based on the Target Case and the
Wall Street Estimates, in each case, taking into account the
Synergies. These analyses resulted in a range of implied present
values of $5.13 to $6.03 per share of Solectron common stock for
the Target Case and $4.68 to $5.48 per share of Solectron common
stock for the Wall Street Estimates.
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
Solectron or Flextronics or the contemplated transaction.
65
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to Solectrons board of
directors as to the fairness from a financial point of view to
the holders of Shares of the Stock Consideration and the Cash
Consideration to be received by such holders, taken in the
aggregate. These analyses do not purport to be appraisals nor do
they necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual
future results, which may be significantly more or less
favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or
their respective advisors, none of Solectron, Flextronics,
Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast.
The merger consideration was determined through
arms-length negotiations between Solectron and Flextronics
and was approved by Solectrons board of directors. Goldman
Sachs provided advice to Solectron during these negotiations.
Goldman Sachs did not, however, recommend any specific amount of
consideration to Solectron or its board of directors or that any
specific amount of consideration constituted the only
appropriate consideration for the transaction.
As described above, Goldman Sachs opinion to
Solectrons board of directors was one of many factors
taken into consideration by the Solectron board of directors in
making its determination to approve the merger agreement. The
foregoing summary does not purport to be a complete description
of the analyses performed by Goldman Sachs in connection with
the fairness opinion and is qualified in its entirety by
reference to the written opinion of Goldman Sachs attached as
Annex E.
Goldman Sachs and its affiliates, as part of their investment
banking business, are continually engaged in performing
financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. Goldman Sachs has acted as
financial advisor to Solectron in connection with, and has
participated in certain of the negotiations leading to, the
transaction contemplated by the agreement. In addition, Goldman
Sachs is providing and has provided certain investment banking
services to Solectron from time to time, including having acted
as Solectrons financial advisor in connection with the
sale of Kavlico Corporation, a former subsidiary of Solectron,
in May 2004; as lead manager with respect to an offering of
Solectrons 0.50% Convertible Senior Notes due
February 2034 (aggregate principal amount $450,000,000) in
February 2005; and as co-lead manager with respect to a public
offering of Solectrons 8.00% Senior Subordinated
Notes due March 2016 (aggregate principal amount $150,000,000)
in February 2006. Goldman Sachs also may provide investment
banking services to Solectron and Flextronics in the future. In
connection with the above-described investment banking services,
Goldman Sachs has received, and may receive, compensation.
Goldman Sachs is a full service securities firm engaged, either
directly or through its affiliates, in securities trading,
investment management, financial planning and benefits
counseling, risk management, hedging, financing and brokerage
activities for both companies and individuals. In the ordinary
course of these activities, Goldman Sachs and its affiliates may
provide such services to Solectron, Flextronics and their
respective affiliates, may actively trade the debt and equity
securities (or related derivative securities) of Solectron and
Flextronics (or related derivative securities) for their own
account and for the accounts of their customers and may at any
time hold long and short positions of such securities.
The board of directors of Solectron selected Goldman Sachs as
its financial advisor because it is an internationally
recognized investment banking firm that has substantial
experience in transactions similar to the transaction. Pursuant
to a letter agreement dated May 28, 2007, Solectron engaged
Goldman Sachs to act as its financial advisor in connection with
the contemplated transaction. Pursuant to the terms of this
engagement letter, Solectron has agreed to pay Goldman Sachs a
transaction fee based on 0.32% of the aggregate consideration
paid in the transaction, 25% of which became payable upon
execution of the merger agreement and the remainder of which is
payable upon consummation of the transaction. In addition,
Solectron has agreed to reimburse Goldman Sachs for its
reasonable expenses, including attorneys fees and
disbursements, and to indemnify Goldman Sachs and related
persons against various liabilities, including certain
liabilities under the federal securities laws.
66
Interests
of Solectrons Officers and Directors in the
Merger
When considering the Solectron board of directors
recommendation that Solectron stockholders vote in favor of the
proposal to adopt the merger agreement, Solectrons
stockholders should be aware that Solectrons directors and
executive officers may have interests in the merger that differ
from, or which are in addition to, the interests of Solectron
stockholders. These interests create a potential conflict of
interest and may be perceived to have affected their decision to
support or approve the merger. The Solectron board of directors
was aware of these potential conflicts of interest during its
deliberations on the merits of the merger and in making its
decisions in approving the merger agreement, the merger and the
related transactions. These interests include possible continued
employment of certain executive officers of Solectron by the
combined company, the continuation of indemnification rights and
coverage under existing or new directors and
officers liability insurance policies, accelerated vesting
of stock awards to executive officers and directors and the
receipt of other benefits, including accelerated vesting of
amounts contributed to the accounts of executive officers in the
Solectron Executive Deferred Compensation Plan, that would be
triggered by certain terminations on or following the
consummation of the merger. Solectron stockholders should be
aware of these interests when considering the Solectron board of
directors recommendation to adopt the merger agreement.
Treatment
of Stock Options and Restricted Stock
Each outstanding option to purchase shares of Solectron common
stock with an exercise price equal to or less than $5.00,
whether or not exercisable, including those held by executive
officers and directors of Solectron, will be assumed by
Flextronics and converted into an option to purchase Flextronics
ordinary shares. The number of Flextronics ordinary shares
issuable upon exercise of each such option will be equal to the
number of shares of Solectron common stock subject to the
assumed option immediately prior to the effective time of the
merger multiplied by 0.3450, rounded down to the nearest whole
share. The per share exercise price of each such option will be
equal to the exercise price of the assumed Solectron option
immediately prior to the effective time of the merger divided by
0.3450, rounded up to the nearest whole cent. The other terms
and conditions of each assumed stock option will be the same as
those in effect immediately prior to the merger. All other
outstanding options to purchase shares of Solectron common stock
will accelerate and become immediately exercisable for a period
of at least 30 days prior to the effective time, in
accordance with the applicable Solectron stock option plan
pursuant to which such options were granted, but subject to and
conditioned on completion of the merger, and will terminate as
of the effective time to the extent not exercised prior thereto.
Holders of shares of Solectron common stock, including executive
officers and directors of Solectron, that are unvested or
subject to a repurchase option, risk of forfeiture or other
similar condition under a restricted stock purchase agreement or
other similar arrangement will have the same right to elect to
receive cash or Flextronics ordinary shares as other Solectron
stockholders. As a result, such shares of Solectron restricted
stock will be converted into the right to receive Flextronics
ordinary shares (adjusted to reflect the exchange ratio) or cash
(in an amount equal to $3.89 per share of Solectron restricted
stock), as applicable, subject to the same vesting requirements
or other terms and conditions that were applicable to the
Solectron restricted stock prior to the effective time of the
merger.
Notwithstanding the foregoing, pursuant to employment agreements
with and retention arrangements for each of Paul Tufano, Douglas
Britt, Todd DuChene, Roop Lakkaraju, Craig London, Marty Neese,
Kevin OConnor and David Purvis, the vesting of stock
options and restricted stock held by each such executive officer
will accelerate upon termination of such individuals
employment under circumstances that would otherwise entitle the
individual to severance payments pursuant to his employment
agreement. See the sections entitled
Solectron Employment Agreements beginning on page 69
of this joint proxy statement/prospectus and
Solectron Retention Arrangements beginning on page 72
of this joint proxy statement/prospectus.
67
The information in the following table relates to the options
(with a per share exercise price equal to or less than $5.00)
and restricted shares beneficially owned by Solectron executive
officers and directors as of July 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
|
|
Value of
|
|
|
|
|
|
Shares of
|
|
|
Shares of
|
|
|
Value of
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
Solectron
|
|
|
Solectron
|
|
|
Outstanding
|
|
|
|
|
|
Restricted
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Options
|
|
|
Aggregate
|
|
|
Stock
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
that may
|
|
|
Shares of
|
|
|
that may
|
|
|
|
|
|
Subject to
|
|
|
Subject to
|
|
|
Accelerate
|
|
|
Outstanding
|
|
|
Accelerate
|
|
|
|
|
|
Outstanding
|
|
|
Unvested
|
|
|
in Connection
|
|
|
Restricted
|
|
|
in Connection
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
with the
|
|
|
Stock
|
|
|
with the
|
|
Name
|
|
Relationship to Solectron
|
|
(1)
|
|
|
(1)
|
|
|
Merger(1)(2)
|
|
|
(3)
|
|
|
Merger(4)
|
|
|
Paul Tufano
|
|
Executive Vice
|
|
|
750,000
|
|
|
|
520,834
|
|
|
$
|
134,063
|
|
|
|
1,611,993
|
|
|
$
|
6,270,653
|
|
|
|
President and Interim President and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas Britt
|
|
Executive Vice
|
|
|
466,000
|
|
|
|
289,584
|
|
|
$
|
91,084
|
|
|
|
954,750
|
|
|
$
|
3,713,978
|
|
|
|
President, Sales and Account
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd DuChene
|
|
Executive Vice
|
|
|
430,000
|
|
|
|
287,917
|
|
|
$
|
90,867
|
|
|
|
1,016,843
|
|
|
$
|
3,955,519
|
|
|
|
President, General Counsel and
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roop Lakkaraju
|
|
Senior Vice
|
|
|
152,500
|
|
|
|
106,585
|
|
|
$
|
35,359
|
|
|
|
431,200
|
|
|
$
|
1,677,368
|
|
|
|
President and Interim Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig London
|
|
Executive Vice
|
|
|
750,000
|
|
|
|
197,917
|
|
|
$
|
79,167
|
|
|
|
1,138,500
|
|
|
$
|
4,428,765
|
|
|
|
President, Solectron Global Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marty Neese
|
|
Executive Vice
|
|
|
500,000
|
|
|
|
197,917
|
|
|
$
|
79,167
|
|
|
|
1,002,500
|
|
|
$
|
3,899,725
|
|
|
|
President, Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin OConnor
|
|
Executive Vice
|
|
|
550,000
|
|
|
|
197,917
|
|
|
$
|
79,167
|
|
|
|
1,024,750
|
|
|
$
|
3,986,278
|
|
|
|
President and Chief Administrative
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Purvis
|
|
Executive Vice
|
|
|
250,000
|
|
|
|
197,917
|
|
|
$
|
79,167
|
|
|
|
1,278,500
|
|
|
$
|
4,973,365
|
|
|
|
President and Chief Technical
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perry G. Hayes
|
|
Senior Vice
|
|
|
405,800
|
|
|
|
227,234
|
|
|
$
|
50,218
|
|
|
|
197,425
|
|
|
$
|
767,983
|
|
|
|
President, Treasurer and Investor
Relations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warren J. Ligan
|
|
Senior Vice
|
|
|
234,500
|
|
|
|
124,584
|
|
|
$
|
34,309
|
|
|
|
160,450
|
|
|
$
|
624,151
|
|
|
|
President and Chief Accounting
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and executive
officers as a group (18 individuals)
|
|
|
|
|
5,166,800
|
|
|
|
2,481,742
|
|
|
$
|
816,567
|
|
|
|
8,816,911
|
|
|
$
|
34,297,785
|
|
|
|
|
(1) |
|
Reflects options with a per share exercise price equal to or
less than $5.00. |
|
(2) |
|
Reflects the aggregate market value of unexercised options based
on an assumed Solectron stock price of $3.89 per share. For
option grants, the value was computed by multiplying
(1) the difference between $3.89 and the exercise price of
the option, by (2) the number of unexercised options. |
|
(3) |
|
Includes the shares of restricted stock to be granted
September 3, 2007. |
|
(4) |
|
Reflects the aggregate market value of restricted stock
(including the value of restricted stock to be granted
September 3, 2007) assuming that each holder of
restricted stock will elect to receive $3.89 in cash for each
share of Solectron common stock. For restricted stock awards,
value is computed by multiplying (i) $3.89, by
(ii) the number of outstanding shares of restricted stock. |
68
Solectron
Employment Agreements
Solectron and Paul Tufano entered into an Amended and Restated
Employment Agreement effective as of March 14, 2007.
Pursuant to the terms of Mr. Tufanos agreement, if
Mr. Tufanos employment is terminated for reasons
other than cause, death or disability,
or if he resigns for good reason (as such terms are
defined in Mr. Tufanos agreement), and such
termination occurs within 12 months following a change of
control of Solectron (which would include consummation of this
merger), then contingent on Mr. Tufano signing and
delivering to Solectron (or its successor) a separation
agreement and release of claims in a form acceptable to
Solectron (or its successor), he will receive the following:
|
|
|
|
|
For a period of 24 months, continuing severance payments of
his average base salary and average annual target bonus for the
two years prior to termination (or such shorter period if
Mr. Tufano was employed for less than two years), to be
paid in equal installments in accordance with Solectrons
(or its successors) normal payroll practices;
|
|
|
|
All options granted to Mr. Tufano will fully vest and
become exercisable for a period of three months following his
termination (or, if earlier, until the date the options expire);
|
|
|
|
All shares of restricted stock granted to Mr. Tufano will
fully vest;
|
|
|
|
Mr. Tufano and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for a period of 36 months;
|
|
|
|
All amounts contributed by Solectron to Mr. Tufanos
account in the Solectron Executive Deferred Compensation Plan
will vest and no longer be subject to forfeiture;
|
|
|
|
Mr. Tufano will receive other compensation or benefits as
may be required by law (such as, for example, COBRA
coverage); and
|
|
|
|
A gross-up
payment to reimburse Mr. Tufano for any taxes payable under
Section 4999 of the Code, including taxes payable on such
gross-up
payment.
|
If Mr. Tufanos employment is terminated for reasons
other than cause, death or disability,
or if he resigns for good reason (as such terms are
defined in Mr. Tufanos agreement), and such
termination occurs prior to or after 12 months following a
change of control of Solectron (which would include consummation
of this merger), then contingent on Mr. Tufano signing and
delivering to Solectron (or its successor) a separation
agreement and release of claims in a form acceptable to
Solectron (or its successor), he will receive the following:
|
|
|
|
|
For a period of 12 months plus one additional month for
every full year that Mr. Tufano has been employed (up to a
maximum of 24 months) (the Severance Payment
Period), continuing severance payments of his base salary
and annual target bonus for the year of termination, to be paid
periodically in accordance with Solectrons (or its
successors) normal payroll practices;
|
|
|
|
All options granted to Mr. Tufano will fully vest and
become exercisable and all shares of restricted stock granted to
Mr. Tufano will fully vest;
|
|
|
|
Mr. Tufano and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for the Severance Payment Period;
|
|
|
|
All amounts contributed by Solectron to Mr. Tufanos
account in the Solectron Executive Deferred Compensation Plan
will vest and no longer be subject to forfeiture; and
|
|
|
|
Mr. Tufano will receive other compensation or benefits as
may be required by law (such as, for example, COBRA coverage).
|
Each of Douglas Britt, Todd DuChene, Craig London, Marty Neese,
Kevin OConnor and David Purvis entered into employment
agreements with Solectron. Pursuant to the terms of such
agreements, if the executive is terminated for reasons other
than cause, death or disability, or if
the executive resigns for good reason (as such terms
are defined in the executive officers employment
agreement) and such termination is within 12 months
following a change of control of Solectron (which would include
consummation of this merger), then contingent on
69
the executive signing and delivering to Solectron (or its
successor) a separation agreement and release of claims in a
form acceptable to Solectron (or its successor), the executive
will receive the following:
|
|
|
|
|
For a period of 24 months, continuing severance payments of
the executives average base salary and average annual
target bonus for the two years prior to the termination (or such
shorter period if the executive was employed for less than two
years), to be paid in equal installments in accordance with
Solectrons normal payroll practices;
|
|
|
|
All options granted to the executive will fully vest and become
exercisable for a period of three months following his
termination (or, if earlier, until the date the options expire);
|
|
|
|
All shares of restricted stock granted to the executive will
fully vest;
|
|
|
|
The executive and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for a period of 36 months;
|
|
|
|
The executive will receive other compensation or benefits as may
be required by law (for example, COBRA coverage); and
|
|
|
|
A gross-up
payment to reimburse the executive for any taxes payable under
Section 4999 of the Code, including taxes payable on such
gross-up
payment.
|
If the executive is terminated for reasons other than
cause, death or disability, or if the
executive resigns for good reason (as such terms are
defined in the executive officers employment agreement)
prior to or after 12 months following a change of control
of Solectron (which would include consummation of this merger),
then contingent on executive signing and delivering to Solectron
(or its successor) a separation agreement and release of claims
in a form acceptable to Solectron (or its successor), the
executive will receive the following:
|
|
|
|
|
For a period of 12 months plus one additional month for
every full year that the executive has been employed (up to a
maximum of 24 months) (the Severance Payment
Period), continuing severance payments of his base salary
and annual target bonus for the year of termination, to be paid
periodically in accordance with Solectrons (or its
successors) normal payroll practices;
|
|
|
|
The executive and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for the Severance Payment Period;
|
|
|
|
The executive will receive other compensation or benefits as may
be required by law (such as, for example, COBRA
coverage); and
|
|
|
|
A gross-up
payment to reimburse the executive for any taxes payable under
Section 4999 of the Code, including taxes payable on such
gross-up
payment.
|
Solectron and Roop Lakkaraju entered into an employment
agreement effective as of April 17, 2007. Pursuant to the
terms of Mr. Lakkarajus agreement, if
Mr. Lakkarajus employment is terminated for reasons
other than cause, or if he resigns for good
reason (as such terms are defined in
Mr. Lakkarajus agreement), and such termination
occurs within 12 months following a change of control of
Solectron (which would include consummation of this merger),
then contingent on Mr. Lakkaraju signing and delivering to
Solectron (or its successor) a separation agreement and release
of claims in a form acceptable to Solectron (or its successor),
he will receive the following:
|
|
|
|
|
For a period of 24 months, continuing severance payments of
his average base salary and average annual target bonus for the
two years prior to termination (or such shorter period if
Mr. Lakkaraju was employed for less than two years), to be
paid in equal installments in accordance with Solectrons
(or its successors) normal payroll practices;
|
|
|
|
All options granted to Mr. Lakkaraju will fully vest and
become exercisable for a period of three months following his
termination (or, if earlier, until the date the options expire);
|
|
|
|
All shares of restricted stock granted to Mr. Lakkaraju
will fully vest;
|
70
|
|
|
|
|
Mr. Lakkaraju and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for a period of 36 months;
|
|
|
|
All amounts contributed by Solectron to
Mr. Lakkarajus account in the Solectron Executive
Deferred Compensation Plan will vest and no longer be subject to
forfeiture;
|
|
|
|
Mr. Lakkaraju will receive other compensation or benefits
as may be required by law (such as, for example, COBRA
coverage); and
|
|
|
|
A gross-up
payment to reimburse Mr. Lakkaraju for any taxes payable
under Section 4999 of the Code, including taxes payable on
such
gross-up
payment.
|
If Mr. Lakkarajus employment is terminated for
reasons other than cause, death or
disability, or if he resigns for good
reason (as such terms are defined in
Mr. Lakkarajus agreement), and such termination
occurs within 12 months of a change of control of Solectron
(which would include consummation of this merger), then
contingent on Mr. Lakkaraju signing and delivering to
Solectron (or its successor) a separation agreement and release
of claims in a form acceptable to Solectron (or its successor),
he will receive the following:
|
|
|
|
|
For a period of 12 months plus one additional month for
every full year that Mr. Lakkaraju has been employed (up to
a maximum of 24 months) (the Severance Payment
Period), continuing severance payments of his base salary
and annual target bonus for the year of termination, to be paid
periodically in accordance with Solectrons (or its
successors) normal payroll practices;
|
|
|
|
Mr. Lakkaraju and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for the Severance Payment Period;
|
|
|
|
Mr. Lakkaraju will receive other compensation or benefits
as may be required by law (such as, for example, COBRA
coverage); and
|
|
|
|
A gross-up
payment to reimburse the executive for any taxes payable under
Section 4999 of the Code, including taxes payable on such
gross-up
payment.
|
Perry Hayes entered into an employment agreement and Warren
Ligan entered into a transition agreement with Solectron.
Pursuant to the terms of the agreements, if the executive is
terminated for reasons other than cause, death or
disability, or the executive resigns for good
reason (as such terms are defined in the agreements), and
such termination is within 12 months following a change of
control of Solectron (which would include consummation of this
merger), then contingent on executive signing and delivering to
Solectron (or its successor) a separation agreement and release
of claims in a form acceptable to Solectron (or its successor),
the executive will receive the following:
|
|
|
|
|
For a period of 18 months, continuing severance payments of
the executives average base salary and average annual
target bonus for the two years prior to the termination (or such
shorter period if the executive was employed for less than two
years), to be paid in equal installments in accordance with
Solectrons normal payroll practices;
|
|
|
|
All options granted to the executive will fully vest and become
exercisable for a period of three months following his
termination (or, if earlier, until the date the options expire);
|
|
|
|
All shares of restricted stock granted to the executive will
fully vest;
|
|
|
|
The executive and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for a period of 36 months;
|
|
|
|
The executive will receive other compensation or benefits as may
be required by law (such as, for example, COBRA
coverage); and
|
|
|
|
A gross-up
payment to reimburse the executive for any taxes payable under
Section 4999 of the Code, including taxes payable on such
gross-up
payment.
|
If Mr. Hayes employment is terminated for reasons
other than cause, death or disability,
or if he resigns for good reason (as such terms are
defined in the his agreement), and such termination occurs
within 12 months of a
71
change of control of Solectron (which would include consummation
of this merger), then contingent on Mr. Hayes signing and
delivering to Solectron (or its successor) a separation
agreement and release of claims in a form acceptable to
Solectron (or its successor), he will receive the following:
|
|
|
|
|
For a period of 12 months plus one additional month for
every full year that Mr. Hayes has been employed (up to a
maximum of 24 months) (the Severance Payment
Period), continuing severance payments of his base salary
and annual target bonus for the year of termination, to be paid
periodically in accordance with Solectrons (or its
successors) normal payroll practices;
|
|
|
|
Mr. Hayes and his eligible dependents will continue to
receive company-paid coverage for medical, dental, vision
and/or
financial counseling benefits for the Severance Payment Period;
|
|
|
|
Mr. Hayes will receive other compensation or benefits as
may be required by law (such as, for example, COBRA
coverage); and
|
|
|
|
A gross-up
payment to reimburse the executive for any taxes payable under
Section 4999 of the Code, including taxes payable on such
gross-up
payment.
|
The following table identifies, for each of Messrs. Tufano,
Britt, DuChene, Lakkaraju, London, Neese, OConnor, Purvis,
Hayes and Ligan, the estimated values of the (i) cash
severance payments and, (ii) continued benefit coverage to
which each such executive will be entitled pursuant to the
agreement described above assuming that the executive is
terminated for reasons other than cause, death or disability or,
where applicable, resigns for good reason immediately following
the effective time of the merger (based on the executives
average base salary and average target bonus for the two years
prior to the date of termination):
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Estimated Value of
|
|
|
|
Cash Severance
|
|
|
Continued Benefit
|
|
Name
|
|
Payments(1)
|
|
|
Coverage
|
|
|
Paul Tufano
|
|
$
|
2,500,004
|
|
|
$
|
27,882
|
|
Douglas Britt
|
|
$
|
1,496,027
|
|
|
$
|
41,823
|
|
Todd DuChene
|
|
$
|
1,425,000
|
|
|
$
|
41,823
|
|
Roop Lakkaraju
|
|
$
|
1,540,032
|
|
|
$
|
41,823
|
|
Craig London
|
|
$
|
1,848,000
|
|
|
$
|
27,882
|
|
Marty Neese
|
|
$
|
1,429,316
|
|
|
$
|
13,708
|
|
Kevin OConnor
|
|
$
|
1,498,000
|
|
|
$
|
41,591
|
|
David Purvis
|
|
$
|
1,848,000
|
|
|
$
|
41,823
|
|
Perry Hayes
|
|
$
|
821,553
|
|
|
$
|
27,882
|
|
Warren Ligan
|
|
$
|
936,000
|
|
|
$
|
27,882
|
|
|
|
|
(1) |
|
Reflects the terms of severance payments to be made to
executives, but does not reflect any dollar value associated
with the accelerated vesting of executives deferred
compensation account or any gross-up payments to reimburse the
executives for any taxes payable under Section 4999 of the
Code. |
Solectron
Retention Arrangements
On February 27, 2007, in connection with the departure of
then Chief Executive Officer Michael Cannon, the Executive
Compensation and Management Resources Committee of the Solectron
board of directors, referred to in this joint proxy
statement/prospectus as the Committee, approved retention
arrangements for Messrs. Britt, DuChene, London, Neese,
OConnor and Purvis. Under the retention arrangements,
Solectron granted to each executive a discounted stock option
exercisable for 300,000 shares of Solectron common stock
under Solectrons 2002 Stock Plan, referred to in this
joint proxy statement/prospectus as the Stock Plan, and
committed to grant another discounted stock option exercisable
for 300,000 shares to each executive on September 3,
2007. The discounted stock options had an exercise price of
$0.001 per share, and are deemed exercised and become shares of
restricted stock on the date of grant. As part of the retention
arrangements, Solectron also committed to make employer
contributions to the Solectron Executive Deferred Compensation
Plan, referred to in this joint proxy statement/prospectus as
the Deferred Compensation Plan, for the benefit of each
executive in the amount of
72
$150,000 upon Solectrons announcement of the hiring of a
new Chief Executive Officer, and a subsequent employer
contribution to the Deferred Compensation Plan for the benefit
of each executive in the amount of $150,000 on the one-year
anniversary of such announcement. The restricted stock and
employer contributions to the Deferred Compensation Plan would
vest on October 15, 2008, subject to vesting acceleration
under certain circumstances.
In connection with his appointment as Interim President and
Chief Executive Officer to replace Mr. Cannon, Solectron
and Mr. Tufano entered into an amended and restated
employment agreement. Under the terms of Mr. Tufanos
amended and restated agreement, Solectron (i) granted a
discounted stock option exercisable for 125,000 shares of
common stock under the Stock Plan to Mr. Tufano and
committed to grant another discounted stock option exercisable
for 750,000 shares of common stock to Mr. Tufano on
September 3, 2007, and (ii) committed to make an
employer contribution to the Deferred Compensation Plan for the
benefit of Mr. Tufano in the amount of $300,000 upon
Solectrons announcement of the hiring of a new Chief
Executive Officer, and a subsequent employer contribution to the
Deferred Compensation Plan for the benefit of Mr. Tufano in
the amount of $300,000 on the one-year anniversary of such
announcement. The discounted stock options had an exercise price
of $0.001 per share, and are deemed exercised and become shares
of restricted stock on the date of grant. The restricted stock
and employer contributions would vest on October 15, 2008,
subject to vesting acceleration under certain circumstances.
In connection with the appointment of Roop Lakkaraju as Senior
Vice President and Interim Chief Financial Officer to replace
Mr. Tufano, who had been Solectrons Chief Financial
Officer prior to being named Solectrons Interim President
and Chief Executive Officer, the Committee approved the terms of
the executive employment agreement to be entered into with
Mr. Lakkaraju, which included a retention arrangement
whereby, among other things, Solectron (i) granted a
discounted stock option exercisable for 300,000 shares of
restricted stock under the Stock Plan to Mr. Lakkaraju with
50% of the shares subject to such award vesting on
April 10, 2008 and 50% of the shares subject to such award
vesting on April 10, 2009, subject to vesting acceleration
under certain circumstances and (ii) committed to make an
employer contribution to the Deferred Compensation Plan for the
benefit of Mr. Lakkaraju in the amount of $100,000 on
October 15, 2007, with such contribution vesting upon
October 15, 2008, subject to vesting acceleration under
certain circumstances. The discounted stock options had an
exercise price of $0.001 per share, and are deemed exercised and
become shares of restricted stock on the date of grant.
The retention arrangements for each of Messrs. Tufano,
Britt, DuChene, London, Neese, OConnor, Purvis, and
Lakkaraju described above are individually and collectively
referred to in this joint proxy statement/prospectus as the
Retention Arrangements.
On June 3, 2007, the Committee approved the contribution
and crediting of the Solectron contributions to be made to the
Deferred Compensation Plan pursuant to the Retention
Arrangements for Messrs. Britt, DuChene, Lakkaraju, London,
Neese, OConnor and Purvis to each individuals
deferred compensation account as of June 3, 2007, subject
to the terms and conditions of the Deferred Compensation Plan.
The Committee also approved accelerated vesting of all Solectron
contributions to the Deferred Compensation Plan, including
Solectron contributions credited to each executives
account under the Deferred Compensation Plan pursuant to the
Retention Arrangements, if the Deferred Compensation Plan is
terminated. The Committee approved these changes to the
Retention Arrangements to reflect the importance to Solectron
and its stockholders of retaining these executives, in light of
the fact that the contribution trigger for the executives (other
than Mr. Lakkaraju), namely the appointment of a new Chief
Executive Officer, might not occur in light of the pending
merger with Flextronics, and that the Deferred Compensation Plan
could be terminated in connection with the merger prior to the
vesting of the contributed amounts. In addition, the Committee
adopted resolutions to clarify its original intent when it
adopted the Retention Arrangements for these executives, namely
that such contribution amounts and the equity awards made or to
be made to each of Messrs. Britt, DuChene, Lakkaraju,
London, Neese, OConnor and Purvis pursuant to the
Retention Arrangements would vest in full upon a termination of
such individuals employment under circumstances that would
otherwise entitle the individual to severance payments pursuant
to his employment agreement.
On June 3, 2007, the Solectron board of directors approved
the contribution and crediting of the Solectron contributions to
be made to the Deferred Compensation Plan pursuant to the
Retention Arrangement for Mr. Tufano
73
to Mr. Tufanos deferred compensation account as of
June 3, 2007, subject to the terms and conditions of the
Deferred Compensation Plan. The Solectron board of directors
also approved accelerated vesting of all Solectron contributions
to the Deferred Compensation Plan, including Solectron
contributions credited to Mr. Tufanos account under
the Deferred Compensation Plan pursuant to the Retention
Arrangement, if the Deferred Compensation Plan is terminated.
The Solectron board of directors approved these changes to
Mr. Tufanos Retention Arrangement to reflect the
importance to Solectron and its stockholders of retaining
Mr. Tufano, in light of the fact that the contribution
trigger, namely the appointment of a new Chief Executive
Officer, might not occur in light of the pending merger with
Flextronics and that the Deferred Compensation Plan could be
terminated in connection with the merger prior to the vesting of
the contributed amounts. In addition, the Solectron board of
directors adopted resolutions to clarify its original intent
when it adopted the Retention Arrangement for Mr. Tufano,
namely that such contribution amounts and the equity awards made
or to be made to Mr. Tufano pursuant to the Retention
Arrangement would vest in full upon a termination of his
employment under circumstances that would otherwise entitle him
to severance payments pursuant to his employment agreement.
Continued
Benefits
Following the merger, Flextronics will either (i) maintain
Solectrons benefit plans (other than Solectrons
401(k) plans unless Flextronics otherwise notifies Solectron
that such plans will not be terminated immediately prior to the
closing of the merger), (ii) permit each continuing
employee of Solectron and its subsidiaries employed immediately
prior to the effective time and, as applicable, their eligible
dependents, to participate in the employee benefit plans,
programs and policies of Flextronics on terms no less favorable
than those provided to similarly situated employees of
Flextronics, or (iii) a combination of clauses (i) and
(ii). All of Solectrons executive officers currently
participate or are eligible to participate in Solectrons
benefit plans, which include stock plans, medical, dental,
vision, prescription drug, life insurance, accidental death and
dismemberment insurance, business travel accident insurance,
short term and long term disability, employee assistance
program, flexible spending accounts, adoption assistance,
long-term care insurance, 401(k) plans, bonus plans, deferred
compensation plan, and other welfare benefit plans.
Indemnification
of Directors and Officers; Directors and Officers
Insurance
The merger agreement provides that Flextronics will and will
cause the surviving corporation to fulfill and honor
Solectrons obligations under any indemnification
agreements with its current and former directors and officers
and persons who become directors, officers, employees or agents
after the date of the merger agreement but before the effective
time of the merger. In addition, Flextronics has agreed to cause
the surviving corporation to maintain in the certificate of
incorporation and bylaws of the surviving corporation provisions
relating to exculpation, indemnification and the advancement of
expenses that are at least as favorable to the indemnified
directors, officers, employees and agents as those contained in
Solectrons organizational documents. Flextronics has also
agreed to cause the surviving corporation to provide
directors and officers liability insurance coverage
for persons who immediately prior to the effective time of the
merger are covered by Solectrons directors and
officers liability insurance, for events occurring prior
to the effective time. See the section entitled The Merger
Agreement Employee Compensation and
Benefits Director and Officer Indemnification and
Insurance beginning on page 101 of this joint proxy
statement/prospectus.
Board of
Directors and Management of the Combined Company
Under the terms of the merger agreement, Flextronics will
appoint to its board of directors two individuals designated by
Solectron and approved by Flextronics upon consummation of the
merger, to hold office until their earlier resignation or
removal in accordance with Flextronicss Memorandum and
Articles of Association. Following the merger, one or more of
the executive officers of Solectron may become executive
officers of Flextronics. In connection therewith, Flextronics
may enter into compensatory arrangements with one or more
executive officers of Solectron, which arrangements may include
payments of cash and/or grants of equity securities of
Flextronics.
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Material
U.S. Federal Income Tax Consequences of the Merger
The following summary discusses the material U.S. federal
income tax consequences of the merger applicable to a holder of
shares of Solectron common stock. This discussion is based upon
the Internal Revenue Code of 1986, as amended, or the Code,
U.S. Treasury Regulations, judicial authorities, published
positions of the IRS, and other applicable authorities, all as
currently in effect and all of which are subject to change or
differing interpretations (possibly with retroactive effect).
This discussion is limited to U.S. persons that hold their
shares of Solectron common stock as capital assets for
U.S. federal income tax purposes (generally, assets held
for investment). As used in this section, a
U.S. person is a citizen or resident of the
United States, a corporation (or other entity treated as a
corporation for U.S. federal income tax purposes) organized
under the laws of the United States or any State or the District
of Columbia, an estate the income of which is subject to
U.S. federal income taxation regardless of its source, or a
trust (other than a grantor trust) if (A) (i) a court
within the United States is able to exercise primary supervision
over the administration of the trust, and (ii) one or more
U.S. persons have the authority to control all substantial
decisions of the trust or (B) it has a valid election in
place to be treated as a U.S. person.
This discussion does not address all of the tax consequences
that may be relevant to particular Solectron stockholders in
light of their own investment circumstances, including persons
receiving payment for terminated options, or persons who have
acquired Solectron stock upon the exercise of stock options or
pursuant to other compensatory arrangements, and other Solectron
stockholders that are subject to special treatment under
U.S. federal income tax laws. Such stockholders would
include, for example, stockholders who are not
U.S. persons, insurance companies, tax-exempt
organizations, financial institutions, investment companies,
broker-dealers, mutual funds, real estate investment trusts,
partnerships (including for this purpose any entity or
arrangement, domestic or foreign, treated as a partnership for
U.S. federal income tax purposes), and investors in such
entities, U.S. persons whose functional
currency is not the U.S. dollar, and stockholders who hold
Solectron stock as part of a hedge, straddle, constructive sale
or conversion transaction. This discussion does not discuss the
tax consequences of transactions effectuated prior or subsequent
to, or concurrently with, the merger, whether or not in
connection with the merger. This discussion does not address the
tax consequences of the merger to a Solectron stockholder who
owns directly or indirectly taking into account certain
attribution rules including the rules of Treasury Regulations
Section 1.367(a)-3(c)(4)(i),
five percent or more of the total voting power or value of
Flextronics outstanding capital stock immediately after the
merger. In addition, this discussion does not address the tax
consequences of the merger under state, local, or foreign tax
laws. No ruling has been or will be sought from the IRS
regarding the tax consequences of the merger, and no assurance
can be given that the IRS would not assert, or that a court
would not sustain, a position contrary to any of the tax
consequences set forth below.
Flextronics and Solectron intend that the merger will qualify as
a tax-free reorganization within the meaning of
Section 368(a) of the Code.
Flextronicss and Solectrons obligations to complete
the planned two-step merger are conditioned upon
Flextronicss receipt at closing of a tax opinion from
Curtis, Mallet-Prevost, Colt & Mosle LLP and
Solectrons receipt at closing of a tax opinion from Wilson
Sonsini Goodrich & Rosati, Professional Corporation,
each to the effect that, for U.S. federal income tax
purposes, (i) the merger will qualify as a
reorganization within the meaning of
Section 368(a) of the Code and (ii) no gain (except to
the extent of cash received) will be recognized by stockholders
of Solectron (other than a Solectron stockholder who owns,
directly or indirectly taking into account certain attribution
rules including the rules of Treasury Regulations
Section 1.367(a)-3(c)(4)(i),
five percent or more of the total voting power or value of
Flextronicss outstanding capital stock immediately after
the merger). These opinions will be based on the truth and
accuracy of certain factual representations and covenants made
by Flextronics and Solectron (including those contained in tax
representation letters to be provided by Flextronics and
Solectron at the time of closing), and on customary factual
assumptions, limitations and qualifications. The closing tax
opinions do not bind the IRS and do not prevent the IRS from
asserting a contrary opinion. In addition, if any of the
representations or assumptions upon which the closing tax
opinions are based are inconsistent with the actual facts, the
tax consequences of the merger could be adversely affected.
If the merger qualifies as a tax-free reorganization under
Section 368(a) of the Code, the U.S. federal income
tax consequences of the merger to each Solectron stockholder
will vary depending on whether that stockholder
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receives Flextronics ordinary shares, cash or a combination of
cash and Flextronics ordinary shares in exchange for that
stockholders Solectron common stock.
Exchange of Solectron Common Stock for Flextronics Ordinary
Shares. Except as discussed below under
Cash in Lieu of Fractional Flextronics
Ordinary Shares, if a Solectron stockholder receives
solely Flextronics ordinary shares in exchange for its shares of
Solectron common stock, that stockholder will not recognize gain
or loss upon the merger. A Solectron stockholders
aggregate tax basis in the Flextronics ordinary shares that it
receives will be equal to the aggregate tax basis of the
Solectron common stock that such stockholder surrenders
(excluding any portion of its basis in Solectron common stock
that is allocated to cash that it receives in lieu of fractional
Flextronics ordinary shares), and such stockholders
holding period in Flextronics ordinary shares will include its
holding period in the Solectron common stock that it surrenders.
Exchange of Solectron Common Stock for
Cash. If a Solectron stockholder receives solely
cash in exchange for its Solectron common stock pursuant to the
merger, that stockholder will recognize gain or loss equal to
the difference between the amount of cash that it receives and
the aggregate tax basis of the shares of Solectron common stock
that such stockholder surrenders. A Solectron stockholder must
calculate gain or loss separately for each block of shares of
Solectron common stock if that stockholder purchased blocks of
Solectron common stock in different transactions.
Exchange of Solectron Common Stock for a Combination of
Flextronics Ordinary Shares and Cash. Except as discussed
below under Cash in Lieu of Fractional
Flextronics Ordinary Shares, if a Solectron stockholder
receives a combination of Flextronics ordinary shares and cash
in exchange for shares of Solectron common stock, that
stockholder generally will recognize any gain, but not loss,
that it realizes pursuant to the merger.
Such stockholder will recognize gain equal to the lesser of:
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the amount of cash that it receives pursuant to the
merger; and
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the amount of gain that it realizes pursuant to the merger.
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For this purpose, the amount of gain that such stockholder
realizes pursuant to the merger will equal the excess, if any,
of the sum of:
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the cash that it receives; plus
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the fair market value of Flextronics ordinary shares that it
receives, over its tax basis in the Solectron common stock that
such stockholder surrenders pursuant to the merger.
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For this purpose, each Solectron stockholder must calculate the
amount of gain or loss separately for each block of share of
Solectron common stock that it surrenders. Each Solectron
stockholder therefore should consult with its own tax advisor
with respect to the manner in which cash and Flextronics
ordinary shares should be allocated among different blocks of
Solectron common stock.
Cash in Lieu of Fractional Flextronics Ordinary
Shares. If a Solectron stockholder receives cash
instead of a fractional Flextronics ordinary share, it will
recognize a taxable gain or loss based upon the difference
between the amount of cash that stockholder receives with
respect to such fractional share and its tax basis in the shares
of Solectron common stock that is allocated to such fractional
share.
Character of Recognized Gain and Loss. Any
gain that a Solectron stockholder recognizes generally will be
treated as capital gain, except that if it receives cash
pursuant to the merger, that stockholders gain could be
treated as a dividend if the receipt of the cash has the effect
of a dividend for U.S. federal income tax purposes under
Sections 356 and 302 of the Code. See below under
Potential Treatment of Cash as a
Dividend.
If a Solectron stockholders holding period in a block of
its Solectron common stock is greater than one year as of the
consummation of the merger, then such stockholders capital
gain or loss with respect to that block will constitute
long-term capital gain or loss. Long-term capital gains will be
subject to U.S. federal income tax at a maximum rate of 15%
in the hands of certain U.S. holders such as individuals.
The use of capital losses to offset ordinary income from other
sources is subject to limitations.
Potential Treatment of Cash as a Dividend. In
general, the determination of whether the receipt of cash
pursuant to the merger will be treated as a dividend depends
upon the extent to which a Solectron stockholders receipt
of cash reduces its deemed percentage stock ownership of
Flextronics. For purposes of this determination, a Solectron
stockholder will be treated as if it first exchanged all of its
Solectron common stock solely for Flextronics
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ordinary shares and then Flextronics immediately redeemed,
referred to in this joint proxy statement/prospectus as the
deemed redemption, a portion of such Flextronics ordinary shares
in exchange for the cash that such stockholder actually
received. The gain that a Solectron stockholder recognizes
pursuant to the merger followed by the deemed redemption will be
treated as capital gain if (i) the deemed redemption is
substantially disproportionate with respect to its
(and after the deemed redemption it actually or constructively
owns less than 50% of voting power of the outstanding
Flextronics ordinary shares) or (ii) the deemed redemption
is not essentially equivalent to a dividend.
The deemed redemption generally will be substantially
disproportionate with respect to the Solectron stockholder
if the percentage of the outstanding Flextronics ordinary shares
that it actually and constructively owns immediately after the
deemed redemption is less than 80% of the percentage of the
outstanding Flextronics ordinary shares that it is deemed
actually and constructively to have owned immediately before the
deemed redemption. The deemed redemption will not be considered
to be essentially equivalent to a dividend, if it
results in a meaningful reduction in that
stockholders deemed percentage stock ownership of
Flextronics. In applying the above tests, a Solectron
stockholder may, under the constructive ownership rules, be
deemed to own stock that is owned by other persons or otherwise
in addition to the stock it actually owns or owned. The IRS has
ruled that a minority shareholder in a publicly held corporation
whose relative stock interest is minimal and who exercises no
control with respect to corporate affairs is considered to have
a meaningful reduction if the shareholder has even a
minor reduction in such shareholders percentage stock
ownership under the above analysis.
As these rules are complex and dependent upon a Solectron
stockholders specific circumstances, each Solectron
stockholder should consult its tax advisor to determine whether
such stockholder may be subject to these rules.
Any Solectron stockholder who will own 5% or more of either the
total voting power or total value of Flextronicss ordinary
shares after the merger (taking into account ownership under
applicable attribution rules) is subject to additional
requirements to avoid recognizing gain on the merger. Any such
stockholder should consult its tax advisor.
Treatment of Flextronics and Solectron. No
gain or loss will be recognized by Flextronics or Solectron as a
result of the merger.
If either Flextronicss counsel or Solectrons counsel
is unable to deliver a closing tax opinion, then either
Flextronics or Solectron may waive such condition unilaterally
on behalf of all parties and the planned two-step merger will
not be consummated. Instead, Saturn Merger Corp. will be merged
with and into Solectron and Solectron will continue as the
surviving corporation and a wholly-owned subsidiary of
Flextronics, a transaction that generally would not qualify as a
tax-free reorganization under Section 368(a) of the Code.
In that event, a Solectron stockholder will recognize gain or
loss equal the difference between the sum of the cash that it
receives, plus the fair market value of Flextronics ordinary
shares that such stockholder receives, and its tax basis in the
Solectron common stock that it surrenders. Any gain that a
Solectron stockholder recognizes generally will be treated as
capital gain, and if its holding period in a block of its
Solectron common stock is greater than one year as of the
consummation of the transaction, then that stockholders
capital gain or loss with respect to that block will constitute
long-term capital gain or loss. Long-term capital gains will be
subject to U.S. federal income tax at a maximum rate of 15%
in the hands of certain U.S. holders such as individuals.
The use of capital losses to offset ordinary income from other
sources is subject to limitations.
Backup Withholding. Any cash payments to
Solectron stockholders in connection with the merger may be
subject to backup withholding on a holders receipt of
cash, unless such holder furnishes a correct taxpayer
identification number and certifies that he or she is not
subject to backup withholding. Any amount withheld under the
backup withholding rules will generally be allowed as a refund
or credit against the holders U.S. federal income tax
liability, provided the required information is furnished to the
IRS.
HOLDERS OF SHARES OF SOLECTRON COMMON STOCK ARE URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER, AS WELL AS THE EFFECTS OF
STATE, LOCAL, AND FOREIGN TAX LAWS.
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Singapore
Tax Considerations
This summary is of a general nature and is included herein
solely for informational purposes. It is not intended to be, nor
should it be construed as being, legal or tax advice. No
representation regarding the consequences to any particular
holder of ordinary shares is made. This summary of Singapore tax
considerations is based on current law and taxation measures
announced in the Singapore Budget Statement 2007, which are
subject to change, possibly on a retroactive basis, and is
provided for general information. These discussions do not
purport to deal with all aspects of taxation that may be
relevant to particular shareholders in light of their investment
or tax circumstances, or to certain types of shareholders
(including insurance companies, tax-exempt organizations,
U.S. shareholders who actually or constructively own 10% or
more of the total combined voting power of all of
Flextronicss outstanding shares, regulated investment
companies, partnerships or other pass through entities or
investors in such entities, financial institutions or
broker-dealers, expatriates and shareholders that are not
U.S. shareholders subject to special treatment under the
U.S. federal income tax laws). Shareholders should consult
their own tax advisors regarding the particular tax consequences
to such shareholders of any investment in Flextronicss
ordinary shares. In this summary, references to S$
are to Singapore dollars.
Income
Taxation Under Singapore Law
Under current provisions of the Income Tax Act, Chapter 134
of Singapore, corporate profits are taxed at a rate equal to 20%
with effect from the year of assessment 2005. Pursuant to the
Budget Statement 2007, the corporate tax rate in Singapore is
18% from the year of assessment 2008 (that is, in respect of
income earned during the financial year or other fiscal period
ending in 2007), In addition, pursuant to the Budget Statement
2007, 75% of up to the first S$10,000, and 50% of up to the next
S$290,000 of a companys chargeable income (other than
Singapore dividends received by the company) will be exempt from
corporate tax with effect from the year of assessment 2008.
Singapore does not impose withholding tax on dividends. Prior to
January 1, 2003, Singapore applied a full imputation system
to all dividends (other than exempt dividends) paid by a
Singapore resident company. With effect from January 1,
2003, tax on corporate profits is final and dividends paid by a
Singapore resident company will be tax exempt in the hands of a
shareholder, whether or not the shareholder is a company or an
individual and whether or not the shareholder is a Singapore
resident. However, if the resident company was previously under
the imputation system and has unutilized dividend franking
credits as at December 31, 2002, there will be a
5-year
transition period from January 1, 2003 to December 31,
2007, during which a company may remain on the imputation
system. Dividends declared by non-resident companies are not
subject to the imputation system.
Under current Singapore tax law there is no tax on capital
gains, and, thus, any profits from the disposal of shares are
not taxable in Singapore unless the gains arising from the
disposal of ordinary shares is construed to be of an income
nature and subject to tax, especially if they arise from
activities which Inland Revenue Authority of Singapore regards
as the carrying on of a trade or business in Singapore (in which
case, the disposal profits would be taxable as trade profits
rather than capital gains).
There is no stamp duty payable in respect of the holding of
ordinary shares. No duty is payable on the acquisition of new
ordinary shares. Where existing shares are acquired in
Singapore, stamp duty is payable on the instrument of transfer
of the ordinary shares at the rate of S$2 for every S$1,000 of
the market value of the ordinary shares. The stamp duty is borne
by the purchaser unless there is an agreement to the contrary.
Where the instrument of transfer is executed outside of
Singapore, stamp duty must be paid if the instrument of transfer
is received in Singapore. Under Article 22(iii) of
Flextronicss Articles of Association, Flextronicss
directors are authorized to refuse to register any instrument of
transfer of shares unless such instrument is accompanied by a
certificate of payment of stamp duty (if any).
Singapore
Estate Taxation
In the case of an individual who was not domiciled in Singapore
and who died before January 1, 2002, a Singapore estate tax
is imposed on the value of all movable and immovable properties
situated in Singapore. Flextronicss ordinary shares are
considered to be movable property situated in Singapore. Thus,
the estate of an individual shareholder who was not domiciled in
Singapore at the time of his or her death before January 1,
2002
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will be subject to Singapore estate tax on the value of any such
ordinary shares held by the individual upon the
individuals death. Such estate will be required to pay
Singapore estate tax to the extent that the value of the
ordinary shares (or in aggregate with any other assets subject
to Singapore estate tax) exceeds S$600,000. Any such excess will
be taxed at a rate equal to 5% on the first S$12,000,000 of the
individuals Singapore chargeable assets and thereafter at
a rate equal to 10%. If an individual not domiciled in Singapore
dies on or after January 1, 2002, no estate duty is payable
on his moveable property in Singapore.
Tax
Treaties Regarding Withholding Taxes
There is no reciprocal income tax treaty between the United
States and Singapore regarding withholding taxes on dividends
and capital gains.
HOLDERS OF SHARES OF SOLECTRON COMMON STOCK ARE URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER, AS WELL AS THE EFFECTS OF
STATE, LOCAL, AND FOREIGN TAX LAWS.
Accounting
Treatment of the Merger
In accordance with United States generally accepted accounting
principles, Flextronics will account for the merger using the
purchase method of accounting. Under this method of accounting,
Flextronics will record the market value (based on an average of
Flextronicss closing share prices for the five trading
days beginning two days before and ending two trading days after
the date on which the number of Flextronicss ordinary
shares to be issued is known) of its ordinary shares issued in
connection with the merger, the amount of cash consideration to
be paid to holders of Solectron common stock, the fair value of
vested options assumed, and the amount of direct transaction
costs associated with the merger as the estimated purchase price
of acquiring Solectron. Flextronics will allocate the estimated
purchase price to the net tangible and amortizable intangible
assets acquired (including contractual agreements, customer
relationships, licenses, patents and trademarks and developed
technologies), based on their respective fair values at the date
of the completion of the merger. Any excess of the estimated
purchase price over those fair values will be accounted for as
goodwill.
Intangible assets, other than goodwill and indefinite-lived
intangible assets, if any, will be amortized over their
estimated useful lives. Goodwill resulting from the business
combination will not be amortized but instead will be tested for
impairment at least annually (more frequently if certain
indicators are present).
In the event that the management of the combined company
determines that the value of goodwill has become impaired, the
combined company will incur an accounting charge for the amount
of impairment during the fiscal quarter in which the
determination is made.
Flextronics
Financing
Flextronics estimates that it will require up to approximately
$1.9 billion to pay the cash portion of the merger
consideration, including acquisition and financing related
costs, assuming holders of 50% of Solectrons outstanding
shares elect to receive cash. In addition, upon consummation of
the merger, the surviving corporation will be required to offer
to repurchase Solectrons outstanding $150 million of
8.00% Senior Subordinated Notes due 2016 and
$450 million of 0.5% Convertible Senior Notes due 2034
at a price of 101% and 100%, respectively, of the principal
amount of the notes outstanding, plus accrued and unpaid
interest up to, but excluding, the date of repurchase.
Flextronics currently has a $2.0 billion credit facility
through a syndicate of banks led by Bank of America, N.A.
Simultaneously with execution of the merger agreement,
Flextronics and Citigroup agreed to the terms of a commitment
letter pursuant to which Citigroup has committed to provide
Flextronics with a seven-year, senior unsecured term loan
facility of up to $2.5 billion to fund the cash
requirements for the transaction, including the refinancing of
Solectrons debt, if required. Under the terms of
Citigroups commitment letter, the availability of the term
loan is subject to customary conditions precedent. The
commitments under the commitment letter will expire on the
earliest of (i) March 31, 2008, (ii) the date the
term loan becomes effective, and (iii) the termination of
the merger agreement.
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The term loan facility proposed by the commitment letter would
have a term of seven years and would be unconditionally
guaranteed, on a joint and several basis, by Flextronicss
direct and indirect domestic subsidiaries that are or become
guarantors under the existing $2.0 billion credit facility.
Borrowings under the term loan facility would bear interest, at
Flextronicss option, either at: (i) the specified
base rate (the greater of Citibank, N.A.s base rate, the
three-moth certificate of deposit rate plus 0.50% and the
federal funds rate plus 0.50%), plus a margin of 1.00% per
annum, or (ii) LIBOR (the London Interbank Offered Rate)
plus a margin of 2.00% per annum. The commitment letter provides
that the amount of the term loan facility will be reduced by the
amount of any other borrowings made by Flextronics in connection
with the financing of the merger and the amount by which the
cash portion of the merger consideration is less than
$1.8 billion.
Any portion of the term loan facility not drawn at closing would
be available as a delayed draw facility. Flextronics would be
required to pay to Citigroup a commitment fee on the undrawn
portion of the term loan facility from the closing date until
the 45th calendar day after the closing date at a per annum
rate of 0.25% and from and after the 45th calendar day
after closing at a per annum rate of 0.50%.
The representations and warranties, covenants and events of
default under the term loan facility documentation would be the
same (subject to conforming changes) as the representations and
warranties, covenants and events of default under
Flextronicss existing $2.0 billion credit facility
documentation.
The documentation governing the term loan has not been finalized
and, accordingly, the actual terms of the loan may differ from
those described above.
The merger is not conditioned on receipt of financing by
Flextronics and Flextronics continues to evaluate alternative
long-term financing arrangements.
Regulatory
Filings and Approvals Required to Complete the Merger
In order to complete the merger, Flextronics and Solectron must
notify, furnish information to, and, where applicable, obtain
clearance from competition authorities in Brazil, Canada, China,
the European Union, Mexico, Turkey and Ukraine. Flextronics and
Solectron will also notify and furnish information to, on a
voluntary basis, the competition authorities in Singapore. The
merger is also subject to U.S. antitrust laws and, as such,
is subject to review by the DOJ
and/or the
FTC under the HSR Act. Flextronics and Solectron made their
filings under the HSR Act on June 15, 2007, and have made
the necessary filings with competition authorities in Brazil on
June 26, 2007, in Canada on July 6, 2007, in Mexico on
July 6, 2007, in Turkey on July 3, 2007 and in Ukraine
on July 6, 2007. Flextronics and Solectron have informally
notified the competition authorities in China, Mexico and the
European Commission of the merger and expect to file formal
notifications of the merger in China, the European Commission,
Mexico and Singapore in mid-July 2007.
Although Flextronics and Solectron expect to obtain the required
regulatory approvals in all of these jurisdictions, there can be
no assurance that Flextronics and Solectron will obtain the
regulatory approvals necessary or that the granting of these
regulatory approvals will not involve the imposition of
conditions on the completion of the merger or require changes to
the terms of the merger. These conditions or changes could
require the grant of a complete or partial license, a
divestiture or spin-off, or the holding separate of assets or
businesses and, if such required actions are not immaterial,
could result in the conditions to Flextronicss obligation
to complete the merger not being satisfied. Pursuant to the
terms of the merger agreement, Flextronics is not required to
agree to any divestiture of any shares of capital stock or of
any business, assets or properties of Flextronics or its
subsidiaries or affiliates (including Solectron or its
subsidiaries) that will have or would reasonably be expected to
have a material adverse effect on the benefits expected to be
derived from the merger. In addition, Flextronics may refuse to
complete the merger if governmental authorities impose any
material restrictions or limitations on Flextronics, Solectron
or their respective subsidiaries and their ability to conduct
their respective businesses that will have or would reasonably
be expected to have a material adverse effect on the benefits
expected to be derived from the merger. Flextronics and
Solectron also may agree to restrictions or conditions imposed
by antitrust authorities in order to obtain regulatory approval.
In addition, at any time before or after the completion of the
merger, the DOJ, the FTC or others could take action under the
antitrust laws, including seeking to prevent the merger, to
rescind the merger or to conditionally approve the merger upon
the divestiture by Solectron or Flextronics of substantial
assets.
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In some jurisdictions, a competitor, customer or other third
party could initiate a private action under the antitrust or
other laws challenging or seeking to enjoin the merger, before
or after it is completed.
Stock
Exchange Listing; Delisting and Deregistration
The Flextronics ordinary shares to be issued in the merger will
continue to trade on the NASDAQ Global Select Market under the
symbol FLEX.
When the merger is completed, Solectron common stock will be
delisted from the New York Stock Exchange and deregistered under
the Exchange Act. In addition, Solectron will cease to be a
reporting company under the Exchange Act. Further, Solectron
Global Services Canada Inc. exchangeable shares will be delisted
from the Toronto Stock Exchange.
Restrictions
on Sales of Flextronics Ordinary Shares Received in the
Merger
The Flextronics ordinary shares to be issued in connection with
the merger will be registered under the Securities Act and will
be freely transferable, except for Flextronics ordinary shares
issued to any person who is deemed to be an
affiliate of Solectron prior to the merger. Persons
who may be deemed to be affiliates of Solectron
prior to the merger include individuals or entities that
control, are controlled by, or are under common control of
Solectron, prior to the merger, and may include officers and
directors, as well as principal stockholders of Solectron, prior
to the merger. Affiliates of Solectron will be notified
separately of their affiliate status.
Persons who may be deemed to be affiliates of Solectron prior to
the merger may not sell any Flextronics ordinary shares received
by them in connection with the merger except pursuant to:
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an effective registration statement under the Securities Act
covering the resale of those shares;
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an exemption under paragraph (d) of Rule 145 under the
Securities Act; or
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any other applicable exemption under the Securities Act.
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Flextronicss registration statement on
Form S-4,
of which this joint proxy statement/prospectus forms a part,
does not cover the resale of Flextronics ordinary shares to be
received in connection with the merger by persons who may be
deemed to be affiliates of Solectron prior to the merger.
Legal
Proceedings Relating to the Merger
On June 4, 2007, a purported class action complaint was filed in
the Superior Court of the State of California, County of
Santa Clara, alleging breach of fiduciary duty of the
directors of Solectron and seeking to enjoin the merger. While
this case is in the early stages, Solectron believes that it is
without merit. Any judgments, however, in respect of this or
similar lawsuits that are adverse to Flextronics and Solectron
may adversely affect Flextronics and Solectrons ability to
consummate the merger.
Appraisal
Rights
Solectron stockholders that hold Solectron common stock are
entitled to appraisal rights if they comply with certain
provisions of the General Corporation Law of the State of
Delaware, or the DGCL.
Additionally, under the DGCL, if the record holder of the one
share of Solectron Series B Preferred Stock does not cast
any votes in favor of the adoption of the merger agreement at
the Solectron special meeting, then the record holder has the
right to seek an appraisal of, and to be paid the fair
value (as defined pursuant to Section 262 of the
DGCL) for, the Series B Preferred Stock if the stockholder
complies with the provisions of Section 262 of the DGCL.
With respect to the one share of Solectron Series B
Preferred Stock, Solectron believes that if Computershare, as
trustee under the Voting and Exchange Trust Agreement,
exercises any of the votes attached to the one share of
Solectron Series B Preferred Stock to vote in favor of the
proposal to adopt the merger agreement, then the trustee will
not be entitled under Section 262 to an appraisal of the
one share of Solectron Series B Preferred Stock or any
interest therein. Accordingly, Solectron believes that, if the
trustee is instructed by at least one holder of Solectron
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Global Services Canada Inc. exchangeable shares to cast at least
one vote at the Solectron special meeting in favor of the
proposal to adopt the merger agreement and the trustee complies
with these instructions, the trustee will not be entitled to an
appraisal of the one share of Solectron Series B Preferred
Stock or any interest therein under Section 262.
The following discussion is not a complete statement of
appraisal rights under Delaware law and is qualified in its
entirety by the full text of Section 262 of the DGCL, which
explains the procedures and requirements for exercising
statutory appraisal rights and which is attached as Annex G
to this joint proxy statement/prospectus and incorporated herein
by reference. All references in this summary to a
stockholder are to the record holder of the shares
of Solectron common stock as to which appraisal rights are
asserted. Stockholders intending to exercise appraisal rights
should carefully review Annex G.
This joint proxy statement/prospectus constitutes notice to
Solectron stockholders concerning the availability of appraisal
rights under Section 262 of the DGCL.
A stockholder who wishes to exercise appraisal rights should
carefully review the following discussion and Annex G to
this joint proxy statement/prospectus, because failure to fully
comply with the procedures required by Section 262 of the
DGCL will result in the loss of appraisal rights.
Under the DGCL, Solectron stockholders have the right, subject
to compliance with the requirements summarized below, to dissent
and demand an appraisal by the Delaware Court of Chancery of the
fair value of their shares of Solectron common stock
and to be paid in cash such amount in lieu of the merger
consideration if the merger is consummated. For this purpose,
the fair value of Solectron shares of common stock will be their
fair value, excluding any element of value arising from the
consummation or expectation of consummation of the merger, and
including a fair rate of interest, if any, as determined by that
court.
Stockholders who desire to exercise their appraisal rights must
satisfy all of the conditions of Section 262 of the DGCL,
including:
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Written Demand for Appraisal Prior to the Vote at the Special
Meeting. A stockholder must deliver to Solectron a written
demand for appraisal, meeting the requirements of
Section 262 of the DGCL, before the taking of the
stockholders vote on the adoption of the merger agreement
at the special meeting. Voting against or abstaining with
respect to the adoption of the merger agreement, failing to
return a proxy or returning a proxy voting against or abstaining
with respect to the proposal to adopt the merger agreement will
not constitute the making of a written demand for appraisal. The
written demand for appraisal must be in addition to and separate
from any proxy, abstention from the vote on the merger agreement
or vote against the merger agreement. The written demand must
reasonably inform Solectron of the identity of the stockholder
and of the stockholders intent thereby to demand appraisal
of such stockholders shares. Failure to timely deliver a
written demand for appraisal will cause a stockholder to lose
his, her or its appraisal rights.
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Refrain from Voting in Favor of Adoption of the Merger
Agreement. In addition to making a written demand for
appraisal, a stockholder must not vote his, her or its shares of
Solectron capital stock in favor of the adoption of the merger
agreement. A submitted proxy not marked AGAINST or
ABSTAIN will be voted in favor of the proposal to
adopt the merger agreement and will result in the waiver of
appraisal rights. A stockholder that has not submitted a proxy
will not waive his, her or its appraisal rights solely by
failing to vote if the stockholder satisfies all other
provisions of Section 262 of the DGCL.
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Continuous Ownership of Solectron Common
Stock. A stockholder must also continuously hold
his, her or its shares of Solectron stock from the date the
stockholder makes the written demand for appraisal through the
effective time of the merger. Accordingly, a stockholder who is
the record holder of shares of Solectron stock on the date the
written demand for appraisal is made but who thereafter
transfers the shares prior to the effective time of the merger
will lose any right to appraisal with respect to such shares.
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Petition with the Chancery Court. Within
120 days after the effective date of the merger (but not
thereafter), either the surviving corporation or any stockholder
who has complied with the requirements of Section 262 of
the DGCL, which are summarized above, must file a petition in
the Delaware Court of
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Chancery demanding a judicial determination of the fair value of
the shares of Solectron stock held by all stockholders who are
entitled to appraisal rights. This petition in effect initiates
a court proceeding in Delaware. Neither Solectron, if it is the
surviving corporation, nor Saturn Merger II Corp., if it is
the surviving corporation, has any intention at this time to
file such a petition if a demand for appraisal is made, and
stockholders seeking to exercise appraisal rights should not
assume that Solectron or Saturn Merger II Corp., as the
case may be, will file such a petition or that Solectron will
initiate any negotiations with respect to the fair value of such
shares. Accordingly, because Solectron (or Saturn Merger II
Corp., as the case may be) has no obligation to file such a
petition, if no stockholder files such a petition with the
Delaware Court of Chancery within 120 days after the
effective date of the merger, appraisal rights will be lost,
even if a stockholder has fulfilled all other requirements to
exercise appraisal rights. If such a petition is filed, the
Delaware Court of Chancery could determine that the fair value
of shares of Solectron common stock is more than, the same as,
or less than the merger consideration.
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A written demand for appraisal must be executed by or on behalf
of the stockholder of record, fully and correctly, as such
stockholders name appears on the stock certificate. If the
shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, this demand must be executed by
or for the fiduciary. If the shares are owned by or for more
than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder
of record. However, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, he
is acting as agent for the record owner. A person having a
beneficial interest in Solectron common stock held of record in
the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to follow the required
steps summarized herein in a timely manner to perfect whatever
appraisal rights the beneficial owner may have.
A stockholder who elects to exercise appraisal rights should
mail or deliver his, her or its written demand to
Solectrons principal executive offices at Solectron
Corporation, 847 Gibraltar Drive, Milpitas, California, 95035,
Attention: Corporate Secretary. The written demand for appraisal
should state the stockholders name and mailing address,
the number of shares of Solectron capital stock owned by the
stockholder and must reasonably inform Solectron that the
stockholder intends thereby to demand appraisal of his, her or
its shares of Solectron capital stock. Within ten days after the
effective date of the merger, Solectron will provide notice of
the effective date of the merger to all Solectron stockholders
who have complied with Section 262 of the DGCL and have not
voted for the merger.
A record holder, such as a broker, fiduciary, depositary or
other nominee, who holds shares of Solectron capital stock as a
nominee for others, may exercise appraisal rights with respect
to the shares held for all or less than all beneficial owners of
shares as to which such person is the record owner. In such
case, the written demand must set forth the number of shares
covered by such demand. Where the number of shares is not
expressly stated, the demand will be presumed to cover all
shares of Solectron capital stock outstanding in the name of
such record owner.
Within 120 days after the effective date of the merger (but
not thereafter), any stockholder who has satisfied the
requirements of Section 262 of the DGCL may deliver to the
surviving corporation a written demand for a statement listing
the aggregate number of shares not voted in favor of the merger
and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. The
surviving corporation must mail such written statement to the
stockholder within ten days after the stockholders request
is received by the surviving corporation or within ten days
after the latest date for delivery of a demand for appraisal
under Section 262 of the DGCL, whichever is later.
Upon the filing of a petition in the Court of Chancery of the
State of Delaware within 120 days after the effective date
of the merger as set forth above, by a stockholder demanding a
determination of the fair value of Solectron capital stock,
service of a copy of the petition must be made upon the
surviving corporation. The surviving corporation must then,
within 20 days after service, file in the office of the
Register in Chancery in which the petition was filed, a duly
verified list containing the names and addresses of all
stockholders who have demanded payment for their shares and with
whom agreements as to the value of their shares have not been
reached. If the surviving corporation files a petition, the
petition must be accompanied by the duly verified list. The
Register in Chancery, if so ordered by the court, will give
notice of the time and place fixed for the hearing of such
petition by
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registered or certified mail to the surviving corporation and to
the stockholders shown on the list at the addresses therein
stated, and notice also will be given by publishing a notice at
least one week before the day of the hearing in a newspaper of
general circulation published in the City of Wilmington,
Delaware, or such publication as the court deems advisable. The
court must approve the forms of the notices by mail and by
publication, and the surviving corporation must bear the costs
of the notices.
At the hearing on the petition, the Court of Chancery of the
State of Delaware will determine which stockholders have become
entitled to appraisal rights. The court may require the
stockholders who have demanded an appraisal for their shares
(and who hold stock represented by certificates) to submit their
stock certificates to the Register in Chancery for notation of
the pendency of the appraisal proceedings and the Court of
Chancery of the State of Delaware may dismiss the proceedings as
to any stockholder that fails to comply with such direction.
After determining which stockholders are entitled to appraisal
rights, the court will appraise the shares owned by these
stockholders, determining the fair value of such
shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a
fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. In determining such fair value,
the court shall take into account all relevant factors.
Solectron stockholders considering seeking appraisal of their
shares should note that the fair value of their shares
determined under Section 262 of the DGCL could be more
than, the same as or less than the consideration they would
receive pursuant to the merger agreement if they did not seek
appraisal of their shares. In determining the fair rate of
interest, the court may consider all relevant factors, including
the rate of interest which the surviving corporation would have
had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving corporation or by
any stockholder entitled to participate in the appraisal
proceeding, the court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholders
entitled to an appraisal. Any stockholder whose name appears on
the verified list filed by the surviving corporation and who has
submitted such stockholders certificates of stock to the
Register in Chancery, if such is required, may participate fully
in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this
section.
The court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving
corporation to the stockholders entitled thereto. Interest may
be simple or compound, as the court may direct. The courts
decree may be enforced as other decrees in the Court of Chancery
may be enforced.
The costs of the appraisal proceeding may be determined by the
court and taxed against the parties as the court deems equitable
under the circumstances. Upon application of a stockholder who
has perfected appraisal rights, the court may order that all or
a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without
limitation, reasonable attorneys fees and the fees and
expenses of experts, be charged pro rata against the value of
all shares entitled to appraisal.
If a stockholder demands appraisal rights in compliance with the
requirements of Section 262 of the DGCL, then, after the
effective time of the merger, such stockholder will not be
entitled to: (i) vote such stockholders shares of
Solectron capital stock for any purpose; or (ii) receive
payment of dividends or other distributions on such
stockholders shares that are payable to stockholders of
record at a date after the effective time of the merger.
A stockholder may withdraw his, her or its demand for appraisal
rights and accept the merger consideration at any time within
60 days after the effective time of the merger, or at any
time thereafter with the surviving corporations written
approval. Notwithstanding the foregoing, no appraisal proceeding
in the Delaware Court of Chancery shall be dismissed as to any
stockholder without the approval of the court, and such approval
may be conditioned upon such terms as the court deems just. If
any Solectron stockholder withdraws his, her or its demand for
appraisal rights, then his, her or its shares of Solectron
common stock will be automatically converted into the right to
receive Flextronics ordinary shares, cash without interest or a
combination of the two, pursuant to the merger agreement.
Any stockholder wishing to exercise appraisal rights is urged
to consult legal counsel before attempting to exercise appraisal
rights. Failure to comply strictly with all of the procedures
set forth in Section 262 of the DGCL may result in the loss
of a stockholders statutory appraisal rights.
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