Flextronics and Solectron to merge

Singapore-based contract electronics maker Flextronics plans to take over competitor Solectron, the two firms have announced.

Flextronics had revenues of just under $19bn last year, and expects the new company to employ 200,000 and exceed $30bn in revenue.

"Solectron is an extremely important strategic addition to Flextronics and this combination transforms the landscape of our industry," said Flextronics chief executive Mike McNamara.

"By joining forces we expect that the increased scale will enable us to extend our market segment reach and realise significant cost savings."

The two firms will complement each other, McNamara claimed. "Solectron's strength in the high-end computing and telecoms segments will be an invaluable addition to Flextronics' existing capabilities and the combined company will be a market leader in most product market segments," he said.

Paul Tufano, interim chief executive at Solectron, added: "Combining these companies allows us to transcend what we have accomplished individually and significantly reshapes and re-energises our industry."

The merged company will cut costs by at least $200m a year after tax, according to Flextronics chief financial officer Thomas J. Smach. But he warned that it could take 18 to 24 months to realise the savings.

The deal depends on approval from shareholders. Solectron's shareholders are being offered either cash or shares in Flextronics. As of 1 June the deal was valued at more than $3.6bn. Citigroup is providing a $2.5bn loan to support the takeover.

Contract electronics makers including Flextronics build products for brand name vendors like IBM, Motorola and Apple.

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