Cree acquires lighting manufacturer Ruud and BetaLED subsidary

Cree has acquired Ruud Lighting, including its specialist LED brand BetaLED, for $525 million and plans to operate the acquisition as a subsidiary of Cree Lighting.

Aug 18th, 2011

Durham, NC-based Cree Inc acquired Ruud Lighting through a stock and cash transaction valued at approximately $525 million. The companies have a history of partnership in pushing the adoption of LED-based solid-state lighting (SSL), and Cree plans to operate Ruud and its BetaLED brand as a subsidiary of Cree Lighting.

Cree says that its motivation for the acquisition exactly matches the company's stated mission of accelerating the deployment and market acceptance of SSL. Chuck Swoboda, Cree's chairman and CEO said, "Cree is taking another bold step in leading the LED lighting revolution, creating a company that has an unrivaled focus and commitment to driving LED lighting adoption."

Cree and BetaLED have been close partners over a number of years, with the latter using many Cree LEDs in its fixtures. BetaLED will bring a greatly expanded sales channel for Cree Lighting's system products.

Ruud will continue to operate from its Racine, WI headquarters with more than 800 employees joining Cree. Alan Ruud, former chairman and chief executive officer of Ruud Lighting, has joined the Cree board of directors. The acquisition includes $372 million in cash, and stock valued at $211 million based on Wednesday's closing market price of $34.74.

Ruud joins Cree Lighting

Of course Cree is not new to the position of selling both packaged LEDs and lighting fixtures and systems that use the LEDs – presumably in competition with other customers of the component business. Cree entered the lighting systems business in early 2008 when it acquired LED Lighting Fixtures from former Cree Inc co-founder Neal Hunter, and made Hunter the president of Cree LED Lighting Solutions.

Still, Cree has insisted that its activity in the lighting space was ultimately focused on helping LED component customers knock down roadblocks to widespread SSL deployment. Indeed, major announcements this year of an Energy-Star-compliant retrofit lamp for 60W A Lamps, and an even more-efficient prototype that outputs 1330 lm both appeared to be reference designs more so than products destined for sale under the Cree Lighting brand.

Impact on Cree LED customers

Now, however, Cree will operate a lighting business that is solely focused on winning in the fixture/systems game. BetaLED has primarily been focused on the outdoor-lighting market, and is clearly one of the market leaders in the lucrative LED street light space based on publicly-announced customers such as the City of Los Angeles. BetaLED has less of a presence in indoor applications, but without question, has been a major Cree customer.

BetaLED will certainly provide Cree with a ready outlet for the system products, including modules, that Cree Inc and Cree Lighting have introduced. The ready availability of that technology will enable BetaLED to quickly address applications beyond its outdoor-lighting base. Ruud said, "Joining Cree was the right thing to do so Ruud Lighting can build on our leadership position; as leaders we create opportunities for everyone."

Surely Ruud's statement was meant to allay the concerns of other Cree LED customers while recognizing the value that a closer tie will bring to Ruud fixture customers. But that closer relationship will clearly worry some customers of Cree LEDs.

Cree stated that it would gain even more knowledge and expertise regarding what system and luminaire designers need in next-generation LEDs via the Ruud acquisition. There's surely some truth in that, but we will wait to see if it's enough to keep other LED customers from looking elsewhere for a supplier.

Vertical integration trend

Cree isn't the only LED vendor to have close ties to lighting companies. LED maker Philips Lumileds is a sister business to several Philips Lighting brands and the same is true for Osram Opto Semiconductor and Sylvania. Perhaps it's such vertical integration that's needed to drive SSL prices down and increase market penetration.

Vertical intregration may seem unusual, comparing the LED industry to the structure in today's broader semiconductor market. However, back in the 70's and 80's all of the IC vendors also made system products.

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