SGH to acquire Stratus Technologies

SMART Global Holdings (“SGH” or the “company”) (Nasdaq: SGH) today announced it has entered into a definitive agreement with affiliates of Siris Capital Group to acquire Stratus Technologies (“Stratus”), a global leader in simplified, protected and autonomous computing solutions in the data centre and at the edge. Under the terms of the agreement, SGH will pay $225 million in cash at closing and an earn-out payment of up to $50 million, based on the gross profit performance of the Stratus business during the first full 12 fiscal months of Stratus following the closing.

SGH to acquire Stratus Technologies; will expand the company's offerings across edge, core, cloud. (Graphic: Business Wire)

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Consistent with the company’s existing lines of business, Stratus delivers differentiated technology solutions to specialty end markets. In particular, the addition of Stratus’ high-availability, fault-tolerant computing platforms, software and services will expand the company’s Intelligent Platform Solutions (“IPS”) business to better serve Stratus and IPS customers worldwide.

“This transaction builds upon our successful track record of M&A at SGH,” said Mark Adams, CEO of SGH. “The high-availability and fault-tolerant capabilities of Stratus will expand our IPS offerings in edge, core and cloud, and will enable us to more comprehensively address our combined customers’ needs. We look forward to welcoming the Stratus team to SGH.”

Strategic and financial benefits

• Diversified solutions in the data centre and at the edge: Stratus’ high-availability and fault-tolerant platforms, software and services expand IPS’ technology offerings.
• Large-scale global customer base: Stratus has a strong global customer base, including more than half of the Fortune 100 companies.
• Differentiated technology: Stratus offers differentiated products and services, consistent with SGH’s focus on providing value-add solutions for specialty end markets.
• Comprehensive services: Stratus’ services capabilities and infrastructure will result in adding more than $80 million of higher margin, recurring revenue for IPS.
• Strong financial profile expected to be immediately accretive: The transaction is expected to be immediately accretive to gross margin, non-GAAP EPS, and free cashflow.

“By joining SGH, we significantly expand our customer reach and capabilities to deliver data centre and edge solutions and services, enabling our customers to run their most important mission-critical applications,” said Dave Laurello, President and CEO of Stratus. “We are excited to join SGH and look forward to contributing to the company’s growth. Their operating model and acquisition strategy offer tremendous opportunity to our customers, partners and employees.”

Transaction terms and financing

Under the terms of the agreement, which has been approved by the boards of directors of both companies, SGH will make an initial cash payment of $225 million upon closing. Additionally, Stratus equity holders have the potential to receive an earn-out payment up to $50 million based on the gross profit performance of the Stratus business during the first full 12 fiscal months of Stratus following the closing of the transaction, payable in cash, ordinary shares of SGH or a mix of cash and ordinary shares of SGH (at SGH’s election). The transaction is subject to requisite regulatory approvals and satisfaction of customary closing conditions. The transaction is not subject to any financing contingency. SGH exited its third fiscal quarter with cash and cash equivalents of $387 million and an additional $250 million revolving credit facility available for use.

Following the close of the transaction, which is expected to occur in the second half of calendar year 2022, SGH expects to incorporate the Stratus brand and trademarks into the SGH portfolio of businesses and will operate Stratus under its Intelligent Platform Solutions Group.

For more information about this transaction, please visit https://www.sghcorp.com/stratus/.