Xcerra: Back to the Drawing Board

CFIUS wouldn’t clear its sale to Chinese investors.


It’s been nearly two weeks since Xcerra and Hubei Xinyan Equity Investment Partnership announced they have terminated their merger agreement in the face of apparent opposition by the Committee on Foreign Investment in the United States, the federal interagency panel that reviews transactions for their impacts on national security. Xcerra and Hubei Xinyan also withdrew their CFIUS application.

On the same day, Xcerra released financial results for its second fiscal quarter ended January 31. The numbers were generally positive. Q2 sales were $110.3 million, up some 38% from $80.1 million a year earlier. Net income in the quarter more than tripled, to $7.9 million from $2.57 million.

The numbers were even stronger for the six months ended January 31. Sales rose 44% to $230.56 million from $160.2 million, while net income was up nearly 10 times, to $25.46 million from $2.59 million.

Over those six months, the company increased its cash and equivalents to $118.2 million from $103.6 million.

Many companies would be envious of such financial results. Yet, Xcerra’s struggle to complete the acquisition by Chinese investors hung over the company for months.

After the two announcements came out, Dave Tacelli, Xcerra’s president and CEO, told analysts, “There have been many positive developments of working with Xinyan over the past year and a half. Those include building our customer base both at existing accounts and new accounts and also looking at potential investment ideas to broaden our business, as we look forward to partnering with Xinyan in the future.”

According to a Seeking Alpha transcript of the conference call, he added, “Our three pillars of growth have not changed, and the termination of our agreement with Hubei Xinyan does not change the company’s strategic plan. We expect to gain share through a product introduction. We will expand them to adjacent markets like we’ve done with the wafer-level chip-scale package, display drivers, and other markets we may enter in the future.

“And we will continue on a path of strategic acquisition like the investment we’ve made in the Malaysian handling company that gets us into a whole new market segment. So, the pillars are in place, and the strategy is not changed, and we’re executing on the strategy.”

Good luck to you, Mr. Tacelli, and we look forward to catching up with you this July in San Francisco!

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