Allegro MicroSystems, Inc. announced that it has entered into a definitive agreement to sell its manufacturing facility in Thailand (“AMTC”) to an undisclosed third party. The AMTC purchase price is approximately $30 million before fees and expenses. This sale is an important milestone in the execution of Allegro’s manufacturing transformation to streamline back-end operations and enhance gross margin.

Allegro had previously announced its plans for back-end facility consolidation as part of a multi-year strategic transformation to optimize the company’s manufacturing footprint and reduce fixed costs. Last quarter, the company shared that it had successfully transferred production from AMTC into its Manila, Philippines facility (“AMPI”), one quarter earlier than initially planned. The AMTC facility closure and sale will complete the company’s transition to a fabless, asset-lite manufacturing model.

“This transaction demonstrates our strong commitment to and timely execution of our manufacturing transformation initiatives – giving us conviction in our gross margin expansion over time, in line with our long-term financial model,” said Ravi Vig, President and Chief Executive Officer. “I would like to thank the employees for their contributions to transferring production to AMPI ahead of schedule and for their commitment to making this transition successful. The sale of the AMTC facility is an important step in optimizing our manufacturing footprint and will further improve our production flow, reduce our cycle times, and enhance our profitability.”

Allegro expects to close the transaction within the calendar year, subject to governmental approvals in Thailand and customary closing conditions. As a result of the execution of the definitive agreement, Allegro will incur a one-time GAAP non-cash impairment charge to the book value of the facility in the range of $7 million to $9 million in the current quarter. This one-time GAAP impairment charge will be excluded from the non-GAAP financial measures Allegro will report for the year and quarter ending March 26, 2021.