SPTS management buyout wins Bridgepoint investment backing

Updated August 2, 2011 – PR Newswire — SPTS Technologies, formerly known as SPP Process Technology Systems (SPTS), a leading manufacturer of etch, deposition, and thermal processing equipment for the semiconductor and related industries today announced the completion of the transaction by SPTS management and Bridgepoint to acquire the company from Sumitomo Precision Products Co., Ltd. (SPP). The deal closed with an enterprise value of nearly $200 million. SPP will continue to have an association with SPTS through a minority equity stake in the company, and will cooperate with SPTS to jointly serve the Japanese market.

Updated July 10, 2011 – Marketwire — Wafer processing equipment maker SPP Process Technology Systems (SPTS) received the investment backing of Bridgepoint, a European private equity firm, for a management buyout from parent company SPP.

Under the plan, SPP would maintain a minority stake in the new business entity and continue as its partner in a Japan-based joint venture. The company name will remain as SPTS.

SPTS boasts 500 employees in 19 countries. In 2010 it generated sales of $217 million and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $58 million. In 2011, SPTS has acquired etch technologies from Primaxx and Tegal. Bridgepoint calls the company an "attractive opportunity" in the wafer processing equipment sector, as it targets emerging semiconductor growth areas like micro electro mechanical systems (MEMS) and light emitting diodes (LEDs).

Chris Bell, a director at Bridgepoint, noted that the investment company helped SPTS identify initiatives to optimize "operational performance, including acquisitions in attractive niche markets and joint ventures." William Johnson, SPTS president and CEO, added that Bridgepoint’s investment will be applied to market growth in MEMS, compound semiconductor, advanced packaging and power electronics manufacturing equipment sectors. Johnson, along with COO, Kevin Crofton, discussed the deal with Bridgepoint in this podcast interview.

Johnson said that, although the SPP has been very pleased with the progress made by SPTS since its acquisition, the company’s champion during its acquisition, SPP’s president, Susumu Kaminaga, has announced his retirement (within the next few years), and others within SPP were concerned about the cyclicality inherent in the semiconductor business. With SPP being largely an industrial company (it was spun out of Sumitomo Metals Industry, which is in the process of merging with Nippon Steel), the movement by SPTS management to do a buy-out was a welcome overture. The buy-out was initiated by Johnson, Crofton, and Richard Rees in February 2011. Johnson noted that SPP kept a small equity position in the company and both companies intend to enter into a joint venture in Japan later this year.

According to Crofton, Bridgepoint has placed no requirements on the deal other than that the management team executes to its business plan. "Their expectations are very different from what you would see in a US-based VC firm," said Crofton. "They expect to make their return on exit — their investment horizons are typically a 5-year horizon. There isn’t even an expectation to pay any dividends or any sort of monies back to Bridgepoint during their investment period."

Johnson explained that there was no debt involved in the deal: "it is a 100% equity deal. This confirms Bridgepoint’s belief in the strength of our business and future possibilities." He also noted that SPTS will be partnering with Australian company, BluGlass (in a JV), to bring the remote plasma CVD (RPCVD) technology to market in the HB-LED industry. SPTS acquired about 20% of BluGlass last year and formed a JV with them to commercialize its RPCVD process. Johnson characterized RPCVD technology as a potentially disruptive technology for deposition of GaN for the LED and solar markets. "From Bridgepoint’s point of view, it appeared to be one of the jewels in our crown," said Johnson.

Advisers involved in this transaction include: for vendor — BDO (corporate finance), Bingham (legal); for management — Osborne Clarke (legal), Ernst & Young (corporate finance); for Bridgepoint — Ernst & Young (transaction services), Travers Smith (legal), McKinsey, Prismark and OC&C (market due diligence). The transaction is subject to standard competition clearances.

SPP Process Technology Systems (SPTS) was established in October 2009 as the vehicle for the merger of Surface Technology Systems and acquired assets of Aviza Technology. The company was a wholly owned subsidiary of Sumitomo Precision Products Co., Ltd.

SPTS designs, develops and manufactures capital equipment that is used in the production of MEMS, power management devices, advanced packaging, high speed RF components, and LEDs on compound semiconductor substrates. Learn more at www.spp-pts.com.

Bridgepoint is a European private equity firm focusing on the acquisition of companies valued up to €1 billion. See www.bridgepoint.eu.

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