Public offer for RoodMicrotec by Microtest

Stem op deze deal via de stempagina: Mena.nl/genomineerden-best-small-cap-deal-2023

Name of the deal: Public offer for RoodMicrotec by Microtest
Date announced: 13 June 2023
Date closed: 27 October 2023
Published value: 29 million euros
Buyer(s): Microtest (which is majority owned by Xenon Private Equity)
Target: RoodMicrotec NV
Seller: Large number of shareholders of a listed entity

Involved firms and advisors
M&A Advisory | Rothschild & Co
Legal Advisory Corporate/M&A | Linklaters
Financial Due Dilligence | Deloitte
Tax Advisory | Deloitte
M&A Advisory | AXECO
Legal Advisory Corporate/M&A | Bird & Bird

Pitch

Deal outline
Microtest, an Italy based industry-leading provider of microelectronic test and measurement solutions, has acquired RoodMicrotec, a renowned semiconductor company based in the Netherlands. RoodMicrotec, well-known for its wide range of services covering the entire microchip supply chain, will complement Microtest’s existing product and service lineup. The aim of this acquisition for Microtest is to enhance its capabilities in semiconductor testing and to extend its reach into new markets. In June 2023, RoodMicrotec reached an agreement with Microtest and its sponsor Xenon.

Through this transaction, Microtest and RoodMicrotec become a significant European player in the microchip testing space, reflecting the increasing investments in the European semiconductor space and the general trend towards nearshoring and decreasing exposure to and dependency on Asian countries and companies.

Why Should This Deal Win the Award for Best Deal Small-Cap 2023?
The deal is reflective of two overarching trends:

1. Continued delistings: Reflecting minimal interest from institutional investors, lack of liquidity and price formation, and increasing administrative burden and associated costs of listed setting, this deal aligns with the continued delistings of smaller cap companies in the Netherlands.
2. Increased Investment in European Semiconductors: In light of geopolitical turmoil, particularly in China, and a global reversal of some effects of globalization over the past decades to increase control over critical industries, the deal mirrors the increased investment in the European semiconductor space.

Deal rationale
The transaction is the culmination of an extensive strategic review the company conducted since 2021 and worked out in large detail with its advisers. This concluded that RoodMicrotec’s growth potential is hampered by the relatively extensive costs and other non-business-related requirements of operating in a public environment as a listed entity.

The aggregation of RoodMicrotec and Microtest will have many benefits:

It will allow RoodMicrotec to better serve customers’ increasingly sophisticated needs.

It puts the company in a better position to deal with the complex and growing semiconductor market and ride its fundamental trends.

It will give the company a wider and balanced services portfolio addressing a broader range of customers.

It enables cross-selling activities and gives RoodMicrotec better geographical coverage.

It facilitates optimization of the supply chain, recruitment of talent, equipment, and R&D investments.

What is the impact of this deal for the company?
In addition to the strategic impact as described in the previous question, the delisting following the transaction will have various benefits. These include an increase in the company’s ability to achieve the goals and implement the actions of their strategy and reduced costs because they will no longer have to comply with continued obligations as a listed company, including extensive market disclosure and financial reporting obligations.

What is the impact of this deal for the direct stakeholders?

Shareholders: A very compelling premium of 35% to the closing share price on 12 June and a 50% premium over VWAP over the three months prior to 12 June, providing a certain return on their investment.

Clients: It will allow RoodMicrotec to better serve customers’ increasingly sophisticated needs.

It puts the company in a better position to deal with the complex and growing semiconductor market and ride its fundamental trends.

It will give the company a wider and balanced services portfolio addressing a broader range of customers.

Management & employees: It enables cross-selling activities and gives RoodMicrotec better geographical coverage.

It facilitates optimization of the supply chain, recruitment of talent, equipment, and R&D investments.

Society & environment: This transaction brings forward a strong European player in a sector dominated by mainly Asian parties, reducing the dependency of the West on Asia. This follows the trend of an increased focus on proximity and supply chain control due to the protection of intellectual property and geopolitical uncertainties, where companies are increasingly bringing production facilities closer to home from mainly Asian parties.

What is the impact of this deal on society?
This transaction brings forward a strong European player in a sector that is dominated by mainly Asian parties and hence reduces the dependency of the West on Asia. This follows the trend of an increased focus on proximity and supply chain control as a result of (i) protection of intellectual property and (ii) COVID and subsequent geopolitical uncertainty, where companies increasingly bring production facilities closer to home from mainly Asian parties.

What was most complex about this deal?
The complexity in this process is threefold:

1. In the run-up to this transaction, the board and advisers made a broad strategic overview of the possibilities going forward for the company.
2. The reach-out to globally operating market leaders in microchip production and testing.
3. The reach out to shareholders of a company that has been listed since 1996.

1. Strategic Review: In the strategic review, a broad market study was performed, including a thorough analysis of the company itself, its goals going forward, the mapping of the entire microchip production supply chain, the identification of trends in the microchip sector, trends in the end markets of the company’s clients, and the identification of key competitors. From this strategic overview, it was concluded that joining a larger ecosystem would be the most logical step to reach the company’s goals.
2. Identifying Potential Buyers: The next step was to identify potential buyers that would enable RoodMicrotec to realize the goals set out in the review. The outcome was a broad group of (global) market-leading companies in Europe, America, and Asia. Microtest had the best offer for all stakeholders.
3. Reaching Out to Shareholders: As RoodMicrotec has been a listed entity, the shareholders are broadly spread throughout non-institutional investors, making the reach-out to these shareholders more complex than with institutional ones typically found invested in larger-cap listed companies.