Three-Five Systems, the Tempe-based producer of liquid crystal displays, said Wednesday it has signed an agreement to sell its small cell-phone display business to International Display-Works for a minimum of $8 million and as much as $21 million.
Three-Five said it is looking to sell the remainder of its businesses or implement other alternatives that will maximize shareholder value.
Three-Five spokeswoman Elizabeth Sharp declined to say whether the company will survive as an independent entity, saying "that would be speculation at this point."
She said the company is proceeding with plans to move its headquarters from Tempe to Redmond, Wash., a move that is expected to be completed by the end of June.
The company announced the sale after the close of regular trading Wednesday on the New York Stock Exchange.
Three-Five shares rose about 8 percent in after hours trading to 95 cents a share.
The sale of the small LCD business is expected to close in two to four weeks. It includes all of the shares of Three-Five Systems, Beijing, the company’s China-based subsidiary, and displayrelated equipment housed at a Three-Five Systems factory in Manila, Philippines.
Also included is a small sales and engineering group located in Tempe, Sharp said.
International Display-Works Chief Executive Tom Lacey said the acquisition is attractive because it blends well with his company’s existing business.
"We can easily apply the Beijing asset to our business model," he said. "It has
a revenue stream and technology that is complementary to what IDW has done."
He said no decision has been made on what will happen to the Tempe group, although he said the employees might remain at their current location at 1600 N. Desert Drive, Tempe, if they choose to remain with the company.
"We have done this before," Lacey said. "If there are key people who want to stay where they are and keep their kids in the same schools, we can do that."
The Beijing assets include a 56,000-square-foot factory and manufacturing equipment, he said.
In addition to producing LCD modules for cell phones, the Beijing plant is capable of producing displays for printers and medical devices, and it will increase International DisplayWorks’ production capacity by about 40 percent, Lacey said.
The two companies said the final value of the transaction will depend on various conditions.
It includes $8 million in cash to be paid to Three-Five Systems when the deal closes and up to $3 million in additional cash to be paid over time based on inventory consumption and accounts receivable collections.
Three-Five Systems will receive up to $9 million in International DisplayWorks common stock to be paid in May 2006 based on a percentage of the transferred business’ revenue for the proceeding 12 months, if minimum revenue targets are met.
International Display-Works will assume the obligations of Three-Five Systems Beijing, including a $2.4 million in debt.
About 550 Three-Five Systems employees will be involved in the transfer, Lacey said.
Three-Five Systems said it has retained SG Cowen & Co., an investment firm, to study strategic alternatives for its other businesses — display monitors based in Marlborough, Mass.; electronic manufacturing services located in Redmond, Wash., Penang, Malaysia and Manila; and radio frequency modules in Manila.
Three-Five Systems said in a statement it is in discussions with multiple potential buyers for the RF business and has received an initial offer from a potential buyer of the electronics manufacturing business.
In a statement, the company said it "is exploring a range of possible alternatives such as acquisitions, strategic alliances, business combinations and the sale of a portion or all of the company."