Today Topsil concluded a new long-term agreement for supplies of raw material (polysilicon) with a view to increasing the Float Zone (FZ) production in Frederikssund. The agreement was conluded with Wacker Chemie AG, who is one of two global suppliers of raw material for Topsil’s Float Zone production, and it is complementing the current long-term agreement made in 2006 with the other supplier on deliveries in the period 2007 to 2012.
The new long-term agreement will secure further supplies of polysilicon in the period 2010 to 2017, and already on a continuing basis in 2009, Topsil will receive deliveries from Wacker to be able to scale its production to increased volumes as from 2010.
The agreement has been concluded on market terms. As part of the agreement Topsil is effecting a prepayment. The prepayment will be used for payments of raw materials from Wacker in step with the supplies in the period 2010 to 2017.
At the moment Topsil is evaluating the commercial possibilites to sell the increased volume in similar long-term agreements to its customers.
Expansion of production capacity and diversification
Polysilicon is the most important raw material in Topsil’s Float Zone production, and with the conclu-sion of the new long-term agreement Topsil expects to be able to increase its production output by approx.10-15% in 2009, approx. 20-25% in 2010, and approx. 30% in the subsequent years compared to the volumes produced in 2008.
Including the increased raw material volume the total production volume in 2009 is already fully allocated to customers. Topsil is going to increase its production volume in two areas. During the first half of 2009 the opening hours of the existing production equipment will be increased from the present five days per week to continuous operation (24 hours per day, 7 days a week). Furthermore, Topsil will start establishment of a new modern production plant for clean room production in the beginning of 2010 in Frederikssund. The new production plant will house new Float Zone pullers, and the production capacity can be scaled in line with the future sales potential.
Moreover, the new supply agreement will enable Topsil to develop new products based on larger diameters (8 inch) than the present product range, which is primarily composed of 4-6 inch products. Topsil expects a demand for 8 inch products as from 2010.
New long-term agreement with huge strategic value
The agreement with Wacker has not only a considerable commercial value for Topsil to implement the company’s long-term growth plan. It is also a matter of strategic importance, as the market for raw materials for Topsil’s Float Zone production has changed during the last few years, implying that supplies of polysilicon for Float Zone can only be guaranteed in larger volumes by entering long-term agreements with the two global suppliers.
The customers in the semiconductor industry require guarantees for stable supplies from the Float Zone manufacturers. Topsil has now secured supplies from both suppliers of raw materials in the world market, and through the acquisition of Cemat Silicon in the fourth quarter of 2008 Topsil will be able to use the cheaper Czochralski material as feedstock for Float Zone production to the extent it is considered commercially relevant.
The company estimates that the market for polysilicon will change in the years to come, so in the future Topsil will have easier access to conclude new long-term agreements for raw materials in line with the increasing demand.
This will place Topsil in a favourable position to meet the customers’ increasing demand and has established the best possible platform for the implementation of Topsil’s growth strategy.
Outlook for 2008
The conclusion of the raw material agreement with Wacker Chemie AG is not going to affect the revenue and profit forecasts for 2008.
Consequently, Topsil maintains its revenue forecast at a level of DKK 260-280m and a pre-tax profit forecast at a level of DKK 50-60m, as announced in connection with the interim report for the nine months ended 30 September 2008.
Please direct any questions regarding this announcement to:
Keld Lindegaard Andersen, CEO, tel. +45 47 36 56 10
Please note that this translation is provided for convenience only. The Danish version shall prevail in case of discrepancies.
Today, Topsil signed agreements to acquire 95.92% of the share capital in Cemat Silicon S.A. The purchase price of the shares totals PLN 74.8m, corresponding to DKK 164.4m.
Topsil anticipates that the remaining 4.08% of the share capital, which is held by the neighbour and founder of Cemat Silicon, ITME (Institute of Electronic Materials Technology), can be acquired by Topsil on similar terms. It is expected to conclude a final agreement on acquisition of the remaining shares during the coming months.
Topsil expects to take over management of Cemat Silicon S.A. in end-October 2008, and as an-nounced in stock exchange announcement No.13/08 the former CFO of Topsil in the period 2004-2007, Martin Overgaard Hansen, will be appointed CEO of Cemat Silicon S.A.
In the fourth quarter of 2008 Cemat Silicon is expected to contribute with a turnover of about DKK 30m. After allowing for restructurings and nonrecurring costs of approximately DKK 2m in connection with the acquisition, a break-even result (EBIT) is predicted in Cemat Silicon for the accounting year 2008.
Cemat Silicon S.A.
Cemat Silicon owns about 53% of the share capital in Cemat70, who is a real estate company and owner of the buildings, in which Cemat runs its operations. Apart from Cemat Silicon Cemat70 has approximately 60 leases, and has a major rental business. Cemat70’s property is situated in the centre of Warsaw. In order to concentrate resources on the company’s core business, being silicon pro-duction, Topsil will investigate the possibilities of selling the ownership interest in Cemat70 within the coming 9-12 months.
With its 260 employees, Cemat Silicon S.A. had a turnover corresponding to DKK 123m in 2006 and DKK 150m in 2007. In the same period the results (EBIT) were DKK 2m and DKK 5m respectively. The subsidiary Cemat70 S.A. had a turnover of DKK 29m in 2006 and DKK 36m in 2007. The results (EBIT) amounted to DKK 2m and DKK 3m respectively. The estimate for Cemat Silicon’s turnover and result in 2008 is expected to be lower than the 2007 level.
The historical numbers of Cemat70 S.A. are not consolidated in the accounts of Cemat Silicon S.A. A consolidation will be made as from the takeover date.
Synergies and expectations for Cemat Silicon S.A.
Cemat Silicon has existed as an independent company since 1992, but operated in the market for Czochralski silicon under governmental administration as far back as the beginning of the 1960’ies. Cemat Silicon therefore has a very extensive knowledge of silicon production, and Czochralski production in particular.
It is Topsil’s expectation that at the time of acquisition of Cemat the synergy potentials amount to about DKK 25m per year (EBIT). However, nonrecurring costs, including restructuring and IT-upgrading costs, are expected to exceed the synergies to be achieved in the accounting year 2009. Consequently, Cemat Silicon is expected to contritute with a break-even result (EBIT) in 2009. Topsil anticipates that a substantial part of the synergies can be realised as from 2010, and as from 2012 all synergies are expected to have full effect.
It is expected to achieve considerable synergies through:
- a change of product mix in Cemat’s present sales platform,
- ”In-sourcing” of wafering of selected specifications, which is today being processed by sub-suppliers, and
- A general streamlining of production and business procedures.
The last-mentioned synergy will primarily be achieved via the volume, that Topsil will be adding to Cemat Silicon’s wafering processing.
Financing
As mentioned in stock exchange announcement No. 13/08 Topsil wishes to finance a substantial part of the acquisition by means of credit finance. The company has secured a total credit finance of DKK 145m, of which a major part is granted as an acquisition loan, and the remaining part as an extension of the company’s existing overdraft facility.
The remaining part of the purchase amount, and the subsequent share purchase from ITME, will be financed through the company’s own resources.
It is the company’s expectation that a future realisation of the ownership in Cemat70 S.A. will reduce the company’s borrowing requirement considerably.
A stronger Topsil Semiconductor Materials A/S
After the implementation of the transaction Topsil has gained a considerably stronger position as a supplier of silicon wafers to the semiconductor industry.
A complementary product range for medium and high power
Cemat Silicon has a strong product range, especially within EPI wafers produced on Czochralski silicon, and this product range is complementing Topsil’s existing business areas. With this Topsil can offer an extended product range to its customers. The employees of Cemat Silicon contribute with an extensive knowlegde and strong competences within silicon production based on the Czochralski technology. Looking forward the efforts in product and process development will be composed of employees from Cemat Silicon and Topsil respectively, which will strengthen the knowledge, competences, and the innovation in Topsil.
Better utilisation of the production equipment
Cemat Silicon S.A. is producing silicon based on the Czochralski technology, which is today’s most common silicon technology. Through the acquisition of Cemat Silicon S.A. Topsil will master both technologies, and will thereby ensure a wider production platform.
With the acquisition of Cemat Silicon Topsil will have 2 production plants at its disposal, which means that it will be easier to scale a future production, as Topsil sees potentials of being able to expand the existing float zone as well as the Czochralski production in Poland.
Czochralski as substrate for (FZ) Float Zone production
Topsil regards it a big advantage to be able to use the far cheaper Czochralski material as a potential raw material in the future float zone production. One of the largest float zone producers in the world market has already been successful in using CZ material as raw material in its FZ production. Topsil assesses to be able to improve its competitive and business position correspondingly in the coming years by using Czochralski as raw material. In order to continue the expansion of the float zone busi-ness the fundamental and totally necessary platform has been established through the acquisition of Cemat.
Research and development
The company Cemat Silicon is founded by silicon scientists, and originates from the research institu-te ITME, whose 230 scientists are working next door to Cemat Silicon. This fact has enabled Cemat Silicon to research, develop, make tests, etc. in cooperation with ITME, who is researching in electronic materials and is employing 25-30 scientists, who are only working with silicon. Furthermore, ITME is working with EPI and other substrates, including silicon carbide and gallium nitride. They are both substrates that Topsil is contemplating to investigate further in the coming years with a view to new business opportunities.
Positive effect on future raw material contracts
Topsil has a clear expectation, that the acquisition of Cemat Silicon will place Topsil/Cemat in a considerably better position in its existing efforts of concluding long-term agreements on supplies of poly silicon for production of float zone as well as Czochralski in the coming years.
Future expectations
Based on above facts company expects a turnover in 2008 ranging from DKK 250-270m and main-tains its expectations for a profit before tax in 2008 of DKK 50-60m.
In the long term it is the intention to increase the production volume and turnover of Czochralski as well as float zone silicon considerably, and Topsil considers the acquisition of Cemat Silicon the first step in that direction.
Questions may be posed to:
Jens Borelli-Kjær, Chairman, tel. +45 40 16 14 82
Keld Lindegaard Andersen, CEO, tel +45 21 70 87 72
Martin Overgaard Hansen, CEO of Cemat Silicon S.A. , tel. +45 40 21 62 99.
Please note that this translation is provided for convenience only. The Danish version shall prevail in case of discrepancies.
Today, Topsil signed an agreement to acquire 19.28% of the shares in the company Cemat-Silicon S.A. in Warsaw, Poland, and submitted a binding bid to buy the remaining 80.72% of the share capital. The last-mentioned holding is owned by present and former employees, the company Cemat 70, and ITME (Government Research institute). The acquisition implicates that Topsil will strengthen its business platform and market position considerably.
Reasons for the acquisition
- The acquisition of Cemat-Silicon will give Topsil access to the other silicon growth technology; the Czochralski technology, thereby enhancing Topsil’s future product range to cover the entire semiconductor market.
- In addition to an extension of the technology platform the acquisition implies that the company strengthens its position in relation to customers and suppliers.
- It is expected that the merged companies can obtain substantial synergies, including sales, production, and sourcing synergies.
Financing and conditions
The purchase sum for 100% of the capital in Cemat-Silicon S.A. amounts to 171.7m DKK. Topsil expects to fund the acquisition partly from own resources and partly through borrowing from financial institutions.
The acquisition is subject to a takeover of at least 90% of the share capital in Cemat-Silicon S.A. Furthermore, the acquisition is subject to a satisfactory due diligence and granting of adequate financing. In the company’s opinion a satisfactory financing package can be obtained. Topsil expects to take over Cemat-Silicon S.A. on 30 September 2008.
Management
Provided that the acquisition process is successful, Martin Overgaard Hansen will be appointed CEO in Cemat-Silicon S.A. Martin Overgaard Hansen has worked for Topsil for approx. 4 years as the company’s CFO, and most recently as Business Development Director. The managing board of the parent company will be unchanged with Keld Lindegaard Andersen as CEO, and Jørgen Bødker VP, Sales and Marketing.
The merger
Topsil has 50 years experience with R.& D. and production of silicon, produced according to the Float Zone method, and has always had its primary focus on this technology. However, the rapid growth in the silicon business during recent years has urged Topsil to make a strategic decision to enter the Czochralski area as well. For a long period Topsil therefore investigated the possibilities of establishing a Czochralski production, either through acquisition or by starting up production from ”green field” level.
Like the FZ technology, the Czochralski technology requires extensive know-how, which it will take years to build up, so it has been logical for Topsil to focus its strategic work on acquisition of a company with a wide existing knowledge of this technology.
Through the acquisition of Cemat-Silicon S.A. Topsil is implementing its acquisition strategy, and in the opinion of the management Topsil will take over a company with the highest potentials, as Topsil will have direct access to the Czochralski technology, and thereby a full product portfolio of silicon for the semiconductor industry. Both Topsil and Cemat have specialized in products to the discrete semiconductor market, which is the market for single electronic devices (transistors, diodes, etc.) - unlike integrated circuits, where an electronic circuit is built on the surface of the silicon wafer.
Through Cemat’s set-up Topsil will also get access to production and product development in an area with a lower cost structure than in Denmark.
Topsil’s CEO, Keld Lindegaard Andersen, says: ”By the acquisition of Cemat Silicon, Topsil has just taken the step that we have been working on for a long period. Cemat is the perfect match for us.”
Cemat has long experience in wafering; a process that Topsil outsourced to subsuppliers in Taiwan and China in year 2000. Through the acquisition Topsil will be better positioned regarding wafering and will be able to benchmark the present subsuppliers against own production facilities in Warsaw. The company expects that such a benchmark will affect the company’s productions costs positively. The company expects to make substantial investments in Cemat in the coming 3-year period.
As Topsil’s and Cemat’s products are complementing each other, it is expected that it will be possible to obtain synergies in relation to the customers, since Topsil will now be able to offer Czochralski silicon to its customers at competitive prices and vice versa.
Through the acquisition Topsil will be able to develop combined Czochalski/Float Zone products. First, such development will give access to new customers, and secondly Topsil will be more independent of individual raw material suppliers.
In order to secure integration between the two companies in the best possible way, it has been decided to appoint Martin Overgaard Hansen CEO of Cemat-Silicon S.A.
Topsil’s chairman, Jens Borelli-Kjær, says about the future company: ”Topsil’s board and management are convinced that we have made a strategically good buy. The combined business platform is much stronger, and constitutes a good basis for future growth and value adding in favour of the shareholders and the employees of both companies. Also, we are convinced that Topsil’s and Cemat’s customers will profit from our combined technology platform and product range.”
Facts on Cemat-Silicon S.A.
Cemat-Silicon has existed as an independent company since 1992, but operated in the market for Czochralski silicon as far back as the beginning of the 1960’ies. Cemat-Silicon therefore has a very extensive knowledge of silicon production, and Czochralski production in particular.
The Czochralski process is in fact developed by, and named after, one of Cemat-Silicon’s former employees, Jan Czochralski.
The company, that has an annual turnover around 150m DKK and employs approx. 260 employees, has invested heavily in the past few years in the back end of the value chain by introducing EPI growth on silicon. EPI growth is a technology, where a crystalline layer of silicon is deposited on a polished Czochralski wafer. This is an alternative method for producing silicon wafers for the high power market, where Topsil is already operating with FZ products.
The company has modern and well-maintained machinery for production of Czochralski silicon ingots and subsequent wafering at their disposal. Furthermore, the company owns ”state-of-the-art” equip-ment for EPI growth on silicon and clean rooms.
Furthermore, Cemat-Silicon owns about 53% of the share capital of the real estate company Cemat 70, which among other things own the buildings, in which Cemat runs its operations.
Apart from Cemat-Silicon Cemat 70 has approximately 60 leases, and has a major rental business. The property of the company is situated in the centre of Warsaw. Topsil will decide about the future plans for this rental business within the coming year.
The silicon market
The silicon market has developed very positively for Topsil during the past few years, due to short supplies of poly silicon. This shortage caused a substantial price increase of poly silicon (Topsil’s and Cemat’s principal raw material). However, Topsil has been able to charge this price increase to the customers and thereby strengthen earnings considerably.
As thoroughly described in previous announcements Topsil secured supplies of raw materials on a long-term contract, for the time being up to 2012. Topsil is working at closing further high volume raw material contracts on long-term basis, and it is estimated that through the acquisition of Cemat the likelihood of closing further contracts has increased significantly. This is due to the fact that the merged companies will need a higher gross volume, and demand raw materials for both Float Zone and Czochralski production. Furthermore, the acquisition will give Topsil direct access to Cemat-Silicon’s three present raw material suppliers.
The company expects the present market situation to continue more or less unchanged in the coming years.
Future expectations
It is expected that the acquisition of Cemat-Silicon will not affect the company’s results for 2008, and the company therefore maintains its expectations for a profit before tax in 2008 of 50-60m DKK.
Looking ahead the acquisition of Cemat-Silicon is expected to affect the earnings of the companies positively, primarily due to synergies within sales, purchases and production.
Questions may be posed to:
Jens Borelli-Kjær, Chairman, tel. +45 40 16 14 82
Keld Lindegaard Andersen, CEO, tel +45 21 70 87 72
Martin Overgaard Hansen, Business Development Director, tel. +45 40 21 62 99.
Please note that this translation is provided for convenience only. The Danish version shall prevail in case of discrepancies.
