LED maker Cree Inc (CREE.O) on Wednesday said it would pay $525 million for Ruud Lighting Inc, expanding its presence in the market for outdoor lighting systems.
The company's shares fell 7.9 percent in extended trade following the announcement.
The deal is composed of $372 million in cash and $211 million in stock, Cree said in a statement. The company will also pay $85 million to retire outstanding debt.
The deal will have a slightly negative impact on net income for the rest of fiscal 2012, but a positive impact on earnings before one-time items, the company said.
Chief Executive Chuck Swoboda said the acquisition is part of the company's strategy of increasing the market for its products. The company bought an indoor LED lighting retrofit company, LED Lighting Fixtures Inc, in 2008.
With the deal to buy Ruud, however, Cree is banking on the adoption of LEDs for outdoor lighting.
"Just look at streetlights," he said. "It's a tremendous opportunity."
Racine, Wisconsin-based Ruud's LED products include the outdoor lighting line BetaLED. Its major projects include installing 128,000 LED fixtures in Los Angeles streetlights.
Ruud has been a Cree customer for about six years, Swoboda said. About 85 percent of the company's business is in the North America.
Cree said it expects to receive tax benefits of about $143 million related to the deal.
It also updated its first-quarter outlook to account for the deal.
Cree now expects revenue of $265 million to $275 million, up from a prior view of $245 million to $255 million.
Earnings before items, however, will be at the low end of its previous target of 25 cents to 28 cents a share.
Net income is expected to be between 8 cents and 11 cents a share, down from a prior view of 14 cents to 17 cents a share.
Cree shares fell 7.9 percent to $32.00 after closing at $34.74 on the Nasdaq.