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Omni-Celestica merger confirmed

After months of takeover speculation, mainboard-listed contract manufacturer Omni Industries Ltd and Canadian rival Celestica Inc--said to be the third largest electronics manufacturing services provider--have confirmed entering into a merger agreement.

SINGAPORE--After months of takeover speculation, mainboard-listed contract manufacturer Omni Industries Ltd and Canadian rival Celestica Inc--said to be the third largest electronics manufacturing services provider--have confirmed entering into a merger agreement.

The scheme, which values the shares of Omni at around S$1.6 billion (US$890 million), would see the Singapore company delisted from the local exchange and become a wholly-owned subsidiary of Celestica--possibly by the fourth quarter of this year.

According to a joint statement, Omni shareholders will be entitled to receive 0.045 subordinate voting shares of Celestica for each Omni share transferred under the scheme.

Shareholders can also elect to receive cash in respect of some or all of their Omni shares on the basis of S$4.25 for each Omni share. This compares with the company's pre-suspension share price of S$3.12 on Thursday morning, and market expectations of between S$3.30 and S$4.50 a share, said Dow Jones.

It was stressed, however, that the total cash available is limited to S$860 million. If exceeded, cash elections would be pro-rated.

Among the rationale provided for the merger: increased global presence for both companies, particularly in Asia where lower costs are said to have boosted contract manufacturing demand by electronics companies; relatively higher valuations; expanded customer base; and more diversified product offerings.

According to a Bloomberg report, about 10 percent of Celestica's production capacity are in Asia now.

"Omni's strong management team will be key in driving the combined company's growth initiatives in the Asian region," the statement noted. Those who will be entering into employment with Celestica in connection with the scheme are Lee Kim Bock, Khaw Kheng Joo, Sim Beng Chye, and Tan Chow Boon.

Scheme documentation are expected to be sent out by the end of August 2001, and implemented early in the fourth quarter--subject to the satisfaction of procedural requirements, the statement said.

It noted, however, that majority shareholders--Lee, Khaw, Sim, Tan, Koh Boon Hwee, Seow Kiat Wang and Wuthelam Industries (S) Pte Ltd (26 percent)--who currently own or control approximately 32 percent of Omni, have given their irrevocable undertaking to support the scheme.

Other major shareholders are said to include Raffles Nominees Pte Ltd (with 17 percent), DBS Nominees Pte Ltd (14 percent) and Citibank Nominees Pte Ltd (11 percent).

For the financial year ended 31 December 2000, the Celestica group recorded sales of S$17,651 million, adjusted net earnings of S$550 million and a net profit after tax of S$375 million. Omni, meanwhile, recorded sales of S$1,684 million, a profit before tax of S$63 million and a profit after tax (but before minority interest and extraordinary items) of S$50 million.