Flex Ltd. FLEX recently signed a definite agreement to divest its US-based Multek operation to Multi-Fineline Electronix Inc. ("MFLEX"), a wholly-owned subsidiary of Suzhou Dongshan Precision Manufacturing Co. ("DSBJ").
Per the deal, Flex will sell all of the equity interests of its China-based business subsidiary, Multek to MFLEX in an all-cash deal. Upon completion, Multek will continue to operate with its current name and location in Zhuhai, China.
The divestment deal will result in a payment of $273 million to Flex. The transaction is subject to regulatory clearance and is expected to close in the third quarter of calendar year 2018. The sales proceeds will be used toward developing core assets and also strengthen balance sheet. Such asset dropdowns and reduction of debts surely bodes well for the company’s growth.
Per president of Multek "Multek has built a strong reputation for its industry-leading capabilities that range from simple Low Layer Count rigid PCBs, to complex 46-Layer PCBs, High Density Interconnect (HDI) Flexible Printed Circuits, and Rigid-Flex PCBs.”
It is important to note that this strategic acquisition is expected to enhance DSBJ product offerings to customers and solidify its position as a global technology company.
Price Movement
Shares of Flex have gained 1.49% in the past six months as compared with 5.27% loss of the industry it belongs to.
Factors in Favor of Flex
Flex had reported stellar fiscal third-quarter 2018 results, wherein both the top and bottom line surpassed the Zacks Consensus Estimate. Revenues also increased year over year primarily attributed to robust performance across most segments. The top line benefited from new business wins driven by the Sketch-to-Scale initiative as well as continued development of the long-term strategic partnership with Nike NKE.
Zacks Rank & Other Stocks to Consider
Flex carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Micron Technology MU and NVIDIA Corporation NVDA, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Micron and NVIDIA is projected to be 10% and 10.25%, respectively.
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