The world's second largest electronics contactor, Flextronics International Ltd. (NASDAQ: FLEX), will acquire smaller rival, Solectron Corp. (NYSE: SLR for $3.6 billion in a move that will help consolidate an industry plagued by manufacturing overcapacity, as it strives for the top position.
Flextronics, the Singapore based electronics maker said Monday it will pay Solectron shareholders $3.89 per share in cash, 15 percent more than the company's closing price on June 1. The can also choose to receive 0.345 shares of Flextronics.
Flextronics, combined with the fifth largest contract maker will have about 200,000 employees and more than $30 billion in annual revenue.
The merged firm will still place behind the electronic manufacturing leader, Foxconn, owned by Taiwanese firm Hon Hai Precision Industry.
Contract manufacturers assemble finished products and components for technology firms such as Apple Inc. (Nasdaq: AAPL) , or HP Co. (NYSE: HPQ).
Flextronics said the combined company could cut costs by up to $200 million, although it could take as much as 24 months to integrate the companies.
This should be at least 15 percent accretive to Flextronics' earnings per share once all of the synergies are realized, said CFO Thomas Smach, said in a statement.
Solectron shareholders will own 20 percent to 26 percent of Flextronics' outstanding shares.