Flextronics to Acquire Solectron



    
    - Stock and Cash Transaction Estimated At $3.6 Billion in Equity Value

    - Combination Creates Leading Global EMS Company With More Than
    $30 Billion in Annual Revenue
    

    SINGAPORE and MILPITAS, Calif., June 4 /CNW/ -- Flextronics International
Ltd. ("Flextronics") (Nasdaq:   FLEX) and Solectron Corporation ("Solectron")
(NYSE:   SLR) announced today that the two companies have entered into a
definitive agreement for Flextronics to acquire Solectron, creating the most
diversified and premier global provider of advanced design and vertically
integrated electronics manufacturing services ("EMS").
    The combined company will have the broadest worldwide EMS capabilities,
from design resources to end-to-end vertically integrated global supply chain
services, which will enhance its ability to design, build, and ship a complete
package product for its OEM customers. By combining Solectron's resources and
unique skill sets, Flextronics will be able to provide more value and
innovation to customers by leveraging the combined global economies of scale
in manufacturing, logistics, procurement, design, engineering and ODM
services.
    The enhanced capabilities of the combined company will create more value
for its customers and increase their competitiveness by improving their
product development process and supply chain management, while also delivering
improved product quality with improved performance and faster time-to-market.
    Operating in 35 countries, with a combined workforce of approximately
200,000 employees, including approximately 4,000 design engineers, the
combined company's annual revenues will exceed $30 billion across seven well-
diversified customer market segments and several vertical component divisions.

    
    Transaction Terms
    
    Under the terms of the definitive agreement, unanimously approved by the
Boards of Directors of both companies, shareholders of Solectron will receive
total consideration currently valued at approximately $3.6 billion, based on
the closing price of Flextronics ordinary shares on June 1, 2007.
    Each share of common stock of Solectron will be converted into the right
to receive, at the election of each of the individual holders of Solectron
shares, either, but not a combination of (i) 0.3450 shares of Flextronics or
(ii) a cash payment of $3.89 per share, subject to the limitation that not
more than 70% in the aggregate and no less than 50% in the aggregate of
Solectron shares will be converted into shares of Flextronics.
    As a result, if holders of more than 70% of Solectron's outstanding
shares elect to receive Flextronics stock, the shares of those holders to be
converted into Flextronics stock will be proportionately reduced so that not
more than 70% of Solectron's outstanding shares in the aggregate are converted
into shares of Flextronics stock, with those holders' remaining shares
converted into cash.  In this case, Solectron shareholders electing cash
consideration will receive cash consideration for all their shares.
    Alternatively, if holders of more than 50% of Solectron's outstanding
shares elect to receive cash, the shares of those holders to be converted into
cash will be proportionately reduced so that not more than 50% of Solectron's
outstanding shares in the aggregate are converted into cash, with those
holders' remaining shares converted into shares of Flextronics.  In this case,
Solectron shareholders electing stock consideration will receive stock
consideration for all their shares.
    In no case (other than by virtue of fractional shares) will shareholders
who elect to receive the stock consideration receive less than 70% of their
total consideration in Flextronics stock.  Alternatively, in no case will
shareholders who elect to receive cash consideration receive less than 50% of
their total consideration in cash.
    Based upon Solectron's 909.2 million shares and share equivalents
outstanding on March 2, 2007, the range of cash to be paid and shares to be
issued by Flextronics is as follows:

    
                                                                Total Value
    Maximum Cash Payments (assuming 50%
     of consideration paid in cash)       $  1,768,419,886   $ 1,768,419,886
    Minimum Number Flextronics shares
     to be issued (assuming 50% of
     consideration to be paid in stock)        156,839,296   $ 1,835,019,761
      Total value as of June 1, 2007                         $ 3,603,439,647


    Minimum Cash Payments (assuming 30%
     of consideration paid in cash)       $  1,061,051,932   $ 1,061,051,932
    Maximum Number Flextronics shares
     to be issued (assuming 70% of
     consideration to be paid in stock)        219,575,014   $ 2,569,027,665
     Total value as of June 1, 2007                          $ 3,630,079,597
    

    The cash consideration represents a premium of approximately 15% and the
stock consideration represents a premium of approximately 20% over Solectron's
closing price of $3.37 on June 1, 2007.
    While Flextronics will continue to evaluate alternative long-term
financing arrangements, Citigroup Global Markets Inc. has committed to provide
Flextronics with a $2.5 billion seven-year senior unsecured term loan to fund
the cash requirements for this transaction (including the refinancing of
Solectron's debt, if required). Following the acquisition, Solectron will
become a wholly owned subsidiary of Flextronics, and Solectron shareholders
will own approximately 20% to 26% of Flextronics's outstanding shares.
    As part of the agreement, Solectron has the right to nominate two
individuals approved by Flextronics to the board of directors of the combined
company. The transaction is subject to customary closing conditions, including
shareholder approvals of both companies, certain regulatory approvals and
other customary closing conditions.  The acquisition is expected to close by
the end of calendar year 2007. Until the acquisition is completed, both
companies will continue to operate their businesses independently.
    Mike McNamara, Chief Executive Officer of Flextronics, said, "Solectron
is an extremely important strategic addition to Flextronics and this
combination transforms the landscape of our industry. By joining forces, we
expect the increased scale will enable us to further extend our market segment
reach and leverage an increased vertical integration opportunity, realize
significant cost savings, and better serve the needs of our combined
customers, employees and shareholders. Solectron's strength in the high-end
computing and telecom segments will be an invaluable addition to Flextronics's
existing capabilities and the combined company will be a market leader in most
product market segments. We will be a larger, more competitive company and
therefore better positioned to deliver supply chain solutions that fulfill our
customers' increasingly complex requirements. The breadth and depth of the
combined company significantly leverages our vertical integration capability
while taking significant costs out of the combined company's infrastructure. 
The combined company is clearly more diversified and formidable than either on
its own, and we are better positioned to increase shareholder value through
greater cash flow and earnings." McNamara added, "We are thrilled to add
Solectron's customers and employees to our organization."
    Paul Tufano, Executive Vice President and Interim Chief Executive Officer
of Solectron, said, "Flextronics's proven track record, complementary market
positions, strong balance sheet and stellar reputation as a global leader in
electronics manufacturing services make the combination attractive for our
customers, shareholders and employees.  Specifically, the transaction will
provide Solectron's customers with an enhanced portfolio of design and
vertically integrated capabilities, greater scale, and expanded supply chain
leverage along with the advantages of an increased low cost global footprint."
Tufano added, "Combining these two companies allows us to transcend what we
have accomplished individually and significantly reshapes and reenergizes our
industry.  We believe Flextronics has the large scale integration expertise
and systems infrastructure capable of successfully integrating and managing
the combined company to ensure all of the significant synergies are realized.
Flextronics is the best strategic partner for Solectron, and we are extremely
excited about the potential of this combined company going forward and the
value creation that it represents.  Moreover, with the significant stock
component offered in the transaction, Solectron's shareholders have a
meaningful opportunity to participate in the realization of that value."
    McNamara concluded by saying, "Over the last 18 months, we have
reorganized our management structure to create the infrastructure required to
effectively and efficiently add scale to our operations.  As a result, we are
well prepared to achieve the expected synergies by successfully integrating
our new partner into our company."

    
    Financial Expectations
    
    Thomas J. Smach, Chief Financial Officer of Flextronics, stated, "While
some synergies will be achieved in the first 12 months after closing, it could
take up to 18-24 months to fully integrate this acquisition and realize the
full synergy potential, which we estimate to be at least $200 million after-
tax. This should be at least 15% accretive to Flextronics's earnings per share
("EPS") once all of the synergies are realized.  As the integration progresses
and actual synergies are realized, we expect to raise our EPS expectations as
the accretion occurs over the 18-24 month integration period.  Although
restructuring charges are expected to result from the integration of the
acquisition, Flextronics expects to generate cash flow synergies well in
excess of the cash portion of such restructuring charges."
    Smach concluded, "This combination is expected to create customer
benefits, cost reductions and synergies neither company could have achieved on
its own."

    
    Advisors
    
    Citigroup Global Markets Inc. acted as exclusive financial advisor to
Flextronics in connection with the transaction and Curtis, Mallet-Prevost,
Colt & Mosle LLP acted as legal advisor to Flextronics.  Goldman, Sachs & Co.
acted as exclusive financial advisor to Solectron in connection with the
transaction and Wilson Sonsini Goodrich & Rosati acted as legal advisor to
Solectron.

    
    Conference Call and Webcast
    
    A joint conference call hosted by Flextronics and Solectron will be held
today at 5:30 am PDT to discuss this transaction.  This call will be broadcast
via the Internet and may be accessed by logging on to the Investor's section
of Flextronics's website located at www.flextronics.com. Additional
information in the form of a slide presentation that summarizes this
transaction may also be found on the Flextronics website.  A replay of the
broadcast will remain available on the Flextronics website after the call.
    Minimum requirements to listen to the broadcast are Microsoft Windows
Media Player software (free download at
http://www.microsoft.com/windows/windowsmedia/download/default.asp) and at
least a 28.8 Kbps bandwidth connection to the Internet.

    
    About Flextronics
    
    Headquartered in Singapore (Singapore Reg. No. 199002645H), Flextronics
is a leading Electronics Manufacturing Services (EMS) provider focused on
delivering complete design, engineering and manufacturing services to
automotive, computing, consumer digital, industrial, infrastructure, medical
and mobile OEMs. With fiscal year 2007 revenues from continuing operations of
US$18.9 billion, Flextronics helps customers design, build, ship, and service
electronics products through a network of facilities in over 30 countries on
four continents. This global presence provides design and engineering
solutions that are combined with core electronics manufacturing and logistics
services, and vertically integrated with components technologies, to optimize
customer operations by lowering costs and reducing time to market. For more
information, please visit www.flextronics.com.

    
    About Solectron
    
    Solectron Corporation is one of the world's largest providers of complete
product lifecycle services. We offer collaborative design and new product
introduction, supply chain management, lean manufacturing and aftermarket
services such as product warranty repair and end-of-life support to leading
customers worldwide. Solectron works with the world's premier providers of
networking, telecommunications, computing, storage, consumer, automotive,
industrial, medical, self-service automation and aerospace and defense
products. The company's industry-leading Lean Six Sigma methodology (Solectron
Production System(tm)) provides OEMs with quality, flexibility, innovation and
cost benefits that improve competitive advantage. Based in Milpitas, Calif.,
Solectron operates in more than 20 countries on five continents and had sales
from continuing operations of $10.6 billion in fiscal 2006. For more
information, visit us at www.solectron.com.

    Note: SOLECTRON and the Solectron logo are registered trademarks of
Solectron Corporation. The Solectron Production System, SPS, and Solectron
Supply Chain Solutions Suite are also trademarks of Solectron Corporation.
Other names mentioned are trademarks, registered trademarks or service marks
of their respective owners.

    
    Safe Harbor for Forward-Looking Statements
    
    This press release contains forward-looking statements within the meaning
of federal securities laws.  These forward-looking statements include
statements related to the expected timing for closing of the acquisition of
Solectron by Flextronics, the expected synergies and benefits to the combined
company and its customers from the acquisition, the impact of the acquisition
on Flextronics's earnings per share, the ability of Flextronics to
successfully integrate the businesses of the combined company, projected
revenue and earnings and related growth and other statements regarding the
anticipated future performance of the combined company and the industry in
which it operates.  These forward-looking statements are based on current
assumptions and expectations and involve risks and uncertainties that could
cause actual results to differ materially from those anticipated by the
forward-looking statements.  These risks include the possibility that the
acquisition may not be completed as planned or at all, difficulties or delays
in obtaining regulatory or shareholder approvals for the proposed transaction,
the possibility that the revenues, cost savings, growth prospects and any
other synergies expected from the proposed transaction may not be fully
realized or may take longer to realize than expected, that growth in the EMS
business may not occur as expected or at all, the dependence of the combined
company on industries that continually produce technologically advanced
products with short life cycles, the ability of the combined company to
respond to changes and fluctuations in demand for customers' products and the
short-term nature of customers' commitments, and the other risks affecting
Flextronics, Solectron and the combined company as described in the section
entitled "Risk Factors" in the joint proxy statement/prospectus to be provided
to Flextronics's and Solectron's shareholders as well as those described under
"Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in their quarterly and annual reports and
other filings made by Flextronics and by Solectron with the U.S. Securities
and Exchange Commission.  The forward-looking statements in this press release
are based on current expectations and neither Flextronics nor Solectron
assumes any obligation to update these forward-looking statements, except as
required by law. Investors are cautioned not to place undue reliance on these
forward-looking statements.

    
    Additional Information and Where to Find it:
    
    In connection with the proposed merger, Flextronics intends to file with
the Securities and Exchange Commission ("SEC") a Registration Statement on
Form S-4 that will contain a Joint Proxy Statement/Prospectus.  Investors and
security holders are urged to read the Registration Statement and the Joint
Proxy Statement/Prospectus carefully when they become available because they
will contain important information about Flextronics, Solectron and the
proposed merger.  The Joint Proxy Statement/Prospectus and other relevant
materials (when they become available), and any other documents filed with the
SEC, may be obtained free of charge at the SEC's web site www.sec.gov.  In
addition, investors and security holders may obtain a free copy of other
documents filed by Flextronics or Solectron by directing a written request, as
appropriate, to Solectron at 847 Gibraltar Drive, Milpitas, CA 95035,
Attention: Investor Relations, or to Flextronics's U.S. offices at 2090
Fortune Drive, San Jose, CA 95131, Attention: Investor Relations.  Investors
and security holders are urged to read the Joint Proxy Statement/Prospectus
and the other relevant materials when they become available before making any
voting or investment decision with respect to the proposed merger.
    This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of such jurisdiction.  No offering
of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.

    
    Participants in the Solicitation:
    
    Flextronics, Solectron and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies in
connection with the proposed merger.  Information regarding the interests of
these directors and executive officers in the proposed transaction will be
included in the Joint Proxy Statement/Prospectus referred to above. Additional
information regarding the directors and executive officers of Flextronics is
also included in Flextronics's proxy statement (Form DEF 14A) for the 2006
annual general meeting of Flextronics shareholders, which was filed with the
SEC on July 31, 2006.  This document is available free of charge at the SEC's
website (www.sec.gov) and by contacting Flextronics Investor Relations at
Flextronicsinvestorrelations@flextronics.com. Additional information regarding
the directors and executive officers of Solectron is also included in
Solectron's proxy statement (Form DEF 14A) for the 2007 annual stockholders
meeting of Solectron, which was filed with the SEC on December 4, 2006.  This
document is available free of charge at the SEC's website (www.sec.gov) and by
contacting Solectron at 847 Gibraltar Drive, Milpitas, CA 95035, Attention:
Investor Relations.





For further information:

For further information: Thomas J. Smach, Chief Financial Officer, (408)
576-7722, investorrelations@flextronics.com, or Renee Brotherton, Corporate
Communications, (408) 646-5103, renee.brotherton@flextronics.com, both of
Flextronics International Ltd.; Perry G. Hayes, Investor Relations &
Treasurer, (408) 956-7543, perryhayes@solectron.com, or Michael Busselen,
Corporate Communications, (408) 956-6854, michaelbusselen@solectron.com, both
of Solectron Corporation Web Site: http://www.flextronics.com

Organization Profile

FLEXTRONICS INTERNATIONAL LTD.

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SOLECTRON CORPORATION

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