Private equity group set to acquire 90% of MCMS

Electronic News, Jan 5, 1998

Nampa, Idaho--Contract manufacturer Micron Custom Manufacturing Services (MCMS) will soon have a new owner. A New York-based private equity group, Cornerstone Equity Investors, IV LP, has agreed to buy most of MCMS here in a deal valued around $264 million. MCMS management, to be retained under the new alignment, does not have an equity position, although that reportedly could change in the future.

Micron Electronics, Inc. has entered into a definitive agreement with Cornerstone to sell 90 percent of its wholly-owned MCMS contract manufacturing subsidiary through a recapitalization whose total transaction value is $271 million. The transaction is subject to customary conditions and approvals and is expected to close this quarter. PC maker Micron Electronics and its majority owner, component maker Micron Technology, account for under 5 percent of MCMS' revenues, according to Rob Subia, chairman, CEO and president of MCMS. While he hopes to keep that business, there is no formal agreement to do so, he said. MCMS' largest customer is Cisco Systems; others include Fore Systems, and Apple. "Cornerstone's track record of working with management teams to build successful companies makes it an excellent partner," he added. "They purchase companies, grow the business and take them public."

At Micron Electronics, chairman/CEO Joe Daltoso noted the deal allows his company "to further intensify its focus on its core PC operations," said to be aggressively growing through a direct business model. "This transaction provides Micron Electronics with significant investment capital for future growth opportunities and the chance to redirect other critical resources to continue moving the PC business forward. Additionally, it affords MCMS the ability to further expand its operations globally."

MCMS manufactures custom complex printed circuit boards, memory modules and system level assemblies, focusing on networking, telecommunications and computer system industries. It has operations here and in Durham, N.C., Penang, Malaysia, and Colfontaine, Belgium. Sales for fiscal '97 were $292 million, with heavy volume in the U.S.

The contractor and the private equity group with more than $1.2 billion in aggregate committed capital are "an excellent fit," said Tony Downer, managing director of Cornerstone Equity Investors. "We focus intensely on opportunities in the technology-related manufacturing sector. MCMS possesses outstanding management, facilities and customers, and we are eager to be their partner in their growth ahead."