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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DECEMBER 1, 2000
Date of Report (Date of Earliest Event Reported)
DIODES INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-5740 95-2039518
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
Incorporation)
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3050 EAST HILLCREST DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91362
(Address of principal executive offices) (Zip Code)
(805) 446-4800
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
General
On December 1, 2000, the Company purchased all the outstanding
capital stock of FabTech, Inc., a Delaware corporation ("FabTech"), pursuant to
a Stock Purchase Agreement dated as of November 28, 2000, among the Company,
FabTech and Lite-On Power Semiconductor Corporation, a Taiwan corporation
("LPSC").
Since 1996, FabTech has operated a 5-inch silicon wafer foundry
specializing in Schottky products and formerly owned by AT&T. LPSC, which owns
approximately 38% of the Company's outstanding Common Stock, is a member of The
Lite-On Group, a consortium of Taiwan-based manufacturers of power
semiconductors, computer peripherals and communications products.
Strategy
The acquisition of FabTech is a key element in the Company's
strategy of becoming a vertically integrated manufacturer and supplier of
discrete semiconductors. The Company believes that FabTech's wafer foundry and
research and development capacity will contribute significantly to the Company's
goal to develop higher-margin, proprietary products in the areas of
miniaturization, integrated discretes and chip-scale discretes. This expanded
product development capacity, together with the Company's manufacturing
facilities in China and superior customer service, is intended to enable the
Company to become a total solution provider for its customers. FabTech will
continue to provide wafers for use in the Company's internal manufacturing
processes at Diodes-China, as well as to sell wafers to trade customers.
FabTech
FabTech has 210 employees, including eight senior engineers.
FabTech's manufacturing facility, located in Lee's Summit, Missouri, consists of
approximately 110,000 square feet, including a 16,000 square foot clean room,
70,000 square feet of manufacturing equipment and offices, and 40,000 square
feet of storage and mechanical area, leased from a third party. The term of the
lease is ten years, commencing on July 1, 1999. The annual base rent is
approximately $1,400,000, subject to a one percent (1%) annual increase. In
addition, FabTech must pay certain operating costs of the facility.
Terms
The purchase price consists of approximately $6 million in cash
and an earnout of up to $30 million if FabTech meets specified earnings targets
over a four-year period. In addition, FabTech is obligated to repay an aggregate
of approximately $19 million, consisting of (i) approximately $13.6 million
payable, together with interest at LIBOR plus 1%, to LPSC through March 31,
2002, (ii) approximately $2.6 million payable, together with interest at LIBOR
plus 1.1%, to the Company through February 28, 2001 and (iii) approximately $3.0
million payable to a financial institution, which amount was repaid on December
4, 2000 with the proceeds of a capital contribution by the Company.
FabTech has entered into a Volume Purchase Agreement dated as of
October 25, 2000 with LPSC pursuant to which LPSC is obligated to purchase from
FabTech, and FabTech is obligated to manufacture and sell to LPSC, a specified
number of Schottky wafers. In addition, LPSC is obligated to purchase from
FabTech at least 90% of the total number of such wafers purchased by LPSC from
all sources, provided that FabTech is competitive in pricing and quality.
FabTech has entered into management incentive agreements and
severance agreements with its two officers pursuant to which they may be
entitled to (i) bonuses if FabTech meets specified earnings targets over a
four-year period and (ii) severance payments if they are terminated without
"cause" (as defined).
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FabTech has also entered into management incentive agreements with
certain of its key employees, pursuant to which they may be entitled to bonuses
if FabTech meets specified earnings targets over a four-year period.
Fairness Opinion
The Board of Directors of the Company unanimously approved the
acquisition of the outstanding capital stock of FabTech. In reaching its
decision to approve the acquisition, the Board of Directors considered the
following factors, among others:
- The unanimous recommendation by a committee consisting of all
independent directors that the Board of Directors approve the
transaction; and
- The opinion of Duff & Phelps, LLP, dated November 28, 2000, that
the consideration to be paid by the Company in the proposed
transaction is fair to the Company and its stockholders from a
financial point of view.
Amendment to Credit Facility
On December 1, 2000, the Company amended its credit facility with
Union Bank of California. The amended credit facility provides for (i) a term
loan of $10 million for financing the acquisition of FabTech, (ii) a working
capital line of up to $9.0 million and (iii) term commitment notes of up to
approximately $7.6 million for equipment financing. Interest on outstanding
borrowings under the credit facility accrues at LIBOR plus 1.5%. The term loan
facility is payable interest only until December 4, 2001 and then is payable in
36 equal monthly installments. The working capital facility is payable interest
only until June 30, 2002 when it is payable in full. The term commitment notes
repayment schedules range between 15 to 51 monthly installments. The credit
facility is guaranteed by all domestic subsidiaries of the Company and is
secured by all domestic assets of the Company and its subsidiaries. The credit
facility is subject to certain restrictive covenants, including a provision that
the Company maintain a specified ratio of senior funded debt to EBITDA and a
minimum fixed charge coverage ratio.
The foregoing description of the acquisition by the Company of the
outstanding capital stock of FabTech and the Company's amended credit facility
with Union Bank of California does not purport to be complete and is qualified
in its entirety by reference to the complete text of the Stock Purchase
Agreement, the opinion of Duff & Phelps, LLP and the Credit Agreement, which are
attached as exhibits to this Current Report on Form 8-K and are incorporated
herein in their entirety.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements: The financial statements required by
this item will be filed by amendment not later than 60 days
after the date this report on Form 8-K must be filed.
(b) Pro Forma Financial Information: The pro forma financial
information required by this item will be filed by
amendment not later than 60 days after the date this report
on Form 8-K must be filed.
(c) Exhibits
10.30+ Stock Purchase Agreement dated as of November 28, 2000,
among Diodes Incorporated, FabTech, Inc. and Lite-On Power
Semiconductor Corporation.
10.31+ Volume Purchase Agreement dated as of October 25, 2000,
between FabTech, Inc. and Lite-On Power Semiconductor
Corporation.
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10.32+ Credit Agreement dated as of December 1, 2000, between
Diodes Incorporated and Union Bank of California.
10.33+ Subordination Agreement dated as of December 1, 2000, by
Lite-On Power Semiconductor Corporation in favor of Union
Bank of California.
10.34 Subordinated Promissory Note in the principal amount of
$13,549,000 made by FabTech, Inc. payable to Lite-On Power
Semiconductor Corporation.
99.17 Opinion of Duff & Phelps, LLP dated November 28, 2000.
99.18 Press Release: Diodes, Inc. Announces Successful Completion
of FabTech Acquisition
+ All schedules and exhibits have been omitted. Any omitted schedule or
exhibit will be furnished supplementally to the Securities and Exchange
Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 14, 2000 DIODES INCORPORATED
By /s/ Carl Wertz
CARL WERTZ
Chief Financial Officer
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