Kaga Electronics Co. Ltd. and Fujitsu Semiconductor Ltd. (FSL) announced that they have entered into a definitive agreement whereby Kaga Electronics acquires 70 percent shares in Fujitsu Electronics Inc. (FEI) from FSL.

Kaga Electronics plans to also acquire the remaining 30 percent shares held by FSL by the end of 2021. The transfer of 70 percent shares, which takes place in Phase 1 is expected to close in January 2019, subject to approval of relevant regulatory authorities and other customary closing conditions.

The business environment surrounding the electronics trading industry, where many players are competing each other, has been changing more dramatically in recent years on the back of accelerated consolidation and integration of suppliers including semiconductor/device manufacturers. FSL believes that the competition between electronics trading companies will intensify further in the future as their policy changes concerning distribution agents, a growing trend that customers shift their assembly of finished products overseas, changes in demand and supply and also in prices in both domestic and overseas markets, and shortening product lifecycles as a result of ongoing technological innovations.

Under these circumstances, FSL has reached the conclusion that the optimal solution to maximize the value for all stakeholders, including customers and partners, is to integrate the businesses of Kaga Electronics and FEI. In its "Medium-term Management Plan 2018" (released on November 4, 2015), Kaga Electronics has attached utmost importance to "establishment of profit-oriented management," and thus has focused on increasing sales of electronic devices to existing major customers and expanding the EMS business (contracted manufacturing of electrical substrates) primarily in overseas markets. The acquisition of FEI's shares this time is part of the efforts to fulfill its growth strategies embodied in its Medium-term Management Plan. FEI has aimed to expand its global reach with the reinforcement on broadening of the product line-up as well as further development of existing business. FEI can further intensify the growth strategy following this transaction. FSL expects to create the synergies as follows:

  1. Market share expansion for the Electronic Parts and Semiconductor business: Seek to enhance the capability to address clients' needs and expand shares in the electronic parts and semiconductor markets by complementing distribution channels domestically and internationally.
  2. Expansion in scale of the EMS business: Achieve discontinuous growth of the high-value added EMS business, which Kaga Electronic is specialized in, by adding FEI's broad customer base, one of its competitive advantages, to the existing global network of EMS business bases.
  3. Further improvement in management efficiency through collaboration of businesses of the two companies: Seek to improve the profitability of both Kaga Electronics and FEI by optimizing and sharing, to the greatest extent possible, their sales related organizations and other functions.

For the present, FEI will retain its trade name "Fujitsu Electronics Inc." and continue to deliver its existing offerings.