IQE's hole in one?

Golf (the Ryder Cup) and rain may have been the biggest events in south Wales last weekend and Monday but Cardiff based materials suppler IQE plc (www.iqep.com/news-2010/sep_30_10.asp) have also hit the headlines by their acquisition of Galaxy Compound Semiconductors, Inc. (www.galaxywafer.com) and their intention to raise over £20 million to fund this together with capacity expansion, debt repayments and strengthening of their balance sheet. IQE will pay a cash sum for Galaxy of up to 5.5 times their 2010 EBITDA, a total consideration estimated to be between $5.5m and $14.15m. 65 million shares will be placed to fund the acquisition and the other activities. Based in Spokane WA, USA, Galaxy is the world’s leading InSb and GaSb substrate supplier. Founded in 1999, the company was originally a spin off from Johnson-Matthey and for those with long memories their crystal growth dates back to the mid 1960s with Cominco Electronic Materials. The purchase of Galaxy positions IQE as a global leader in the rapidly growing market for antimony based infrared materials. It provides IQE with new manufacturing capacity, new products and new clients. The acquisition certainly looks far more like an Eagle or an Albatross than a Bogey.