DIVESTMENT OF A SUBSIDIARY
Creative Technology Ltd ("Creative") today announced that its wholly owned subsidiary ZiiLABS Inc., Ltd ("ZiiLABS"), a Bermuda incorporated company, has on 19 November 2012 entered into a Share Purchase Agreement with Intel Corporation (UK) Limited ("Purchaser") to divest its equity interest in ZiiLABS Limited (formally known as 3DLABS Limited) ("Company"), a wholly-owned subsidiary in the United Kingdom ("Divestment").
The Company is a contract design entity engaged in, primarily on behalf of ZiiLABS, the research and development of various silicon solutions, including the ZMS chips for Creative.
This transaction is in line with the strategic direction that Creative has undertaken to streamline its businesses. With the highly complex and very expensive development costs for future advance media-rich processors, it will be more cost effective and speedier for Creative to collaborate with partners on future advanced chips for its products, while allowing Creative to focus on its core strength – the designing and marketing of more innovative and exciting products for its customers.
The consideration to be received by Creative from this Divestment is US$30 million in cash and subject to adjustments, as provided in the agreement, primarily for the estimated net working capital balance of the Company. The consideration is arrived at based on a willing buyer, willing seller basis after arm's length negotiation between the parties and takes into account the assembled engineering resources and assets of the Company.
The consideration shall be satisfied by the Purchaser in the following manner:
Completion of this transaction is expected to take place in the current quarter ending 31 December 2012. Completion is conditional upon certain customary closing conditions, including no material adverse changes in the business conditions of the Company.
The book value of the Company is approximately US$1.3 million. The excess of the proceeds from the transaction over the book value of the Company is approximately US$28.7 million. Creative expects to recognise net gains of approximately US$26.8 million from the divestment after expenses and other costs.
Creative intends to utilise the proceeds from the disposal for general corporate purposes, including the funding of Creative's working capital requirements.
For illustration purposes only, based on the most recently completed financial year ended 30 June 2012, the financial effects of the transaction on the net tangible assets per share of Creative, assuming that the Divestment had been effected on 30 June 2012, and earnings per share of Creative, assuming that the Divestment had been effected on 1 July 2012, are set out as follows:
A copy of the share purchase agreement is available for inspection during normal office hours at the registered office of Creative for a period of 3 months from the date of this announcement.
Ng Keh Long
19 November 2012