Sao Paulo SGH Announces Majority Stake Sale in SMART Modular Brazil

10 Sep, 2023

Sao Paulo SGH Announces Majority Stake Sale in SMART Modular Brazil

SMART Global Holdings, Inc. (NASDAQ: SGH) has revealed its strategic move to sell an 81% stake in SMART Modular Technologies do Brasil – Indústria e Comércio de Componentes Ltda. (“SMART Brazil”) for approximately $166 million in cash to Lexar Europe B.V., affiliated with Shenzhen Longsys Electronics Co., Ltd. This deal values SMART Brazil at an initial enterprise worth of $205 million, supporting SGH's focus on high-performance solutions.

SMART Brazil operates independently, assembling and testing modules for electronics manufacturers serving the Brazilian market. This divestiture allows SGH to channel resources into enterprise solutions while strengthening its financial position.

The transaction comprises an upfront payment of $137.7 million (81% of $170 million) and a deferred payment of $28.35 million, alongside SGH retaining a 19% interest. Additionally, there's an option for SGH to sell the remaining stake between 2027 and 2029 based on a specific valuation metric.

Closing is expected by the end of 2023, subject to regulatory approval. SGH anticipates this move will enhance non-GAAP gross margins and will address one-time expenses, including transaction costs and a non-cash charge related to SMART Brazil's operations