Jabil to Divest Aftermarket Services for $725 Million
ST. PETERSBURG, Fla. -- December 17, 2013
Jabil Circuit, Inc. (NYSE: JBL) today announced that it has entered into an
agreement with iQor Holdings, Inc. for the sale of its aftermarket services
business for $725 million.
In 1999, Jabil entered the electronics warranty repair business through a $30
million acquisition (later namedJabil Aftermarket Services,orAMS). “Our AMS
business has been a wonderful asset to Jabil over the past 14 years, as
itgrew through internal growth and acquisitions to represent $1.1 billion in
revenue for Jabil in fiscal 2013. Today, Jabil's AMS business is concentrated
in depot repair for consumer electronics, which is not aligned with our
strategy to focus on diversified manufacturing solutions,” said Mark T.
Mondello, Jabil’s C.E.O.
“This divesture should provide us the financial flexibility to potentially add
more engineering intensive capabilities, which should allow us to expand and
diversify our core manufacturing business. We expect to continue to pursue
opportunities similar to our recent Nypro acquisition,” added Mondello.
Jabil has agreed to an exclusive aftermarket service agreement with iQor
designed to facilitate continuity of service for existing Jabil customers. “We
sincerely appreciate our AMS team and their commitment to customer care and
consistency in execution. We are confident that the strategic fit with iQor
will make for a smooth transition for our Jabil employees, and the vast
majority of our AMS customers will benefit significantly from being a part of
iQor,” said Mondello.
Of the $725 million purchase price, $675 million is cash and $50 million is
senior nonconvertible preferred stock of iQor that accretes dividends at an
annual rate of 8 percent and is redeemable in nine years or upon a change in
control. The final purchase price is subject to certain customary adjustments.
The transaction is subject to certain closing conditions, including regulatory
approvals and receipt of third party consents, and is anticipated to close in
Jabil’s third fiscal quarter of 2014.
In connection with the decision to sell this business, commencing with Jabil's
second fiscal quarter, the operating results associated with this business
will be reclassified into Discontinued Operations –– net of tax in the
Condensed Consolidated Statements of Operations, and the assets and
liabilities associated with this business will be reflected in the Condensed
Consolidated Balance Sheets as assets and liabilities of discontinued
operations, on a retroactive basis.
J.P. Morgan is serving as the exclusive financial advisor to Jabil and Holland
& Knight LLP is acting as Jabil's legal counsel in this transaction.
Jabil said the Company would provide further details and answer questions
about this transaction on its first quarter of fiscal 2014 earnings call
currently scheduled for December 17, 2013 at 4:30 pm EST.
Jabil is an electronic product solutions company providing comprehensive
electronics design, manufacturing and aftermarket product management services
to global electronics and technology companies. Offering complete product
supply chain management from facilities in 30 countries, Jabil provides
comprehensive, individualized-focused solutions to customers in a broad range
of industries. Jabil common stock is traded on the New York Stock Exchange
under the symbol, “JBL”. Further information is available on Jabil’s website:
FORWARD LOOKING STATEMENT:This news release contains forward-looking
statements, including those regarding the amount Jabil will receive upon
redemption of the Preferred Stock; the funding of the purchase price; the
satisfaction of the closing conditions; the expected purchase price; the
completion of the transaction by Jabil's third fiscal quarter of 2014; Jabil’s
strategy of focusing on diversified manufacturing services; this divestiture
providing Jabil with financial flexibility to potentially add more engineering
intensive capabilities, which should allow Jabil to expand and diversify its
core manufacturing; Jabil's pursuit of entities similar to its recent Nypro
acquisition; and the strategic fit of the AMS business under iQor's ownership
as opposed to Jabil's, and the resulting effect on the customers and employees
of the AMS business. The statements in this news release are based on current
expectations, forecasts and assumptions involving risks and uncertainties that
could cause actual outcomes and results to differ materially. These risks and
uncertainties include, but are not limited to: the transaction failing to
close for any reason, including a failure to obtain the necessary third party
consents and regulatory antitrust clearances; a delay in closing; the
potential retention of certain continuing liabilities under contracts
requiring consent due to a failure to obtain such consents prior to closing;
financing for the transaction not occurring as anticipated; the actual
purchase price differing materially from the expected purchase price; the
Preferred Stock proving to have a value substantially less than the stated $50
million face value or not being redeemed in full in nine years; the exclusive
service agreement and limited covenant not to compete could impair Jabil's
ability to attract and retain customers; if not beneficial to AMS customers,
the exclusive aftermarket service agreement with iQor could negatively impact
Jabil's business with common customers; changes to Jabil's strategic focus;
changes to Jabil's acquisition strategy and philosophy; fluctuations in our
stock’s market price; fluctuations in operating results and cash flows;
unexpected, adverse seasonal impacts on demand; changes in macroeconomic
conditions, both in the U.S. and internationally; our financial performance
during and after the current economic conditions; our ability to maintain and
improve costs, quality and delivery for our customers; risks and costs
inherent in litigation; whether our realignment of our capacity will adversely
affect our cost structure, ability to service customers and labor relations;
our ability to take advantage of perceived benefits of offering customers
vertically integrated services; changes in technology; competition;
anticipated growth for us and our industry that may not occur; managing rapid
growth; managing rapid declines in customer demand and other related customer
challenges that may occur; our ability to successfully identify and consummate
acquisitions and divestitures; managing the integration of businesses we
acquire; risks associated with international sales and operations; retaining
key personnel; our dependence on a limited number of large customers; business
and competitive factors generally affecting the electronic manufacturing
services industry, our customers and our business; and other risks, relevant
factors and uncertainties identified in our Annual Report on Form 10-K for the
fiscal year ended August31, 2013, subsequent Reports on Form 8-K and our
other securities filings. Jabil disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Jabil Circuit, Inc.
Beth Walters, 727-803-3511
Senior Vice President, Investor Relations & Communications
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