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Solectron to Buy NatSteel Electronics for $2.4 Billion

Technology: Deal to purchase manufacturing services firm would bolster its presence in Asia.

November 01, 2000|From Times Wire Services

MILPITAS — Solectron Corp., the world's biggest maker of electronics parts for other companies, agreed Tuesday to buy Singapore-based NatSteel Electronics Ltd. for $2.4 billion in cash, giving it a crucial boost in its presence in Asia.

The deal is Solectron's biggest purchase of an electronic manufacturing services company and would strengthen its presence in Europe and the Americas as well as Asia, the company said.

NatSteel Electronics' factories in China, Malaysia and Singapore give Solectron's customers, such as Ericsson, access to the Asian market, one of the world's biggest for electronic products. Sony Corp., Nortel Networks Corp. and others are relying more on outside manufacturers to provide parts to cut costs.

Solectron received pledges from shareholders of NatSteel Electronics to sell 43% of their shares. The shareholders include NatSteel Ltd., which agreed to sell its one-third stake, and Temasek Capital, the government's investment arm.

NatSteel Electronics has about 12,000 employees and more than 2.3 million square feet of manufacturing capacity in 11 sites around the world. Its shares have fallen 48% this year after Apple Computer Inc., which makes up half of the company's revenue, said its profit will be hurt by weaker sales.

Japan accounts for about a quarter of the world's electronics products through companies such as Matsushita Electric Industrial Co. and Sony. Japanese companies haven't been known for their use of outsourcing to build products, although that could be changing, analysts have said.

Two weeks ago, Solectron won a 10-year contract to build lithium ion batteries, and car navigation and audio equipment for Sony. Sony also said it would sell two plants and outsource production of some devices to Solectron, giving Solectron a firm foothold in Japan and Taiwan, important production bases for the electronics industry.

Shares of Milpitas, Calif.-based Solectron shares fell $3.94, or 8%, in heavy trading on the New York Stock Exchange to close at $44.

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Bloomberg News and Reuters contributed to this report.

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