Key Takeaways:
Flex Ltd is separating its Power and Cloud portfolio into a standalone company while acquiring Electrical Power Products for $1 billion, sharpening its focus on AI data center infrastructure.
Flex Ltd agreed to separate its Power and Cloud portfolio into a new publicly traded company called SpinCo and completed the $1 billion acquisition of Electrical Power Products Inc., the company said Wednesday.
"The separation sharpens Flex's focus on advanced manufacturing while SpinCo targets the AI data center and electrification markets," management said on the fiscal fourth-quarter earnings call.
The all-cash acquisition of EP², completed May 4, carries a gross value of about $1.1 billion with anticipated tax benefits of roughly $0.1 billion, yielding a net price of $1 billion. Flex expects the deal to be accretive to adjusted earnings per share in its first full fiscal year following closing.
The moves mark Flex's most aggressive portfolio restructuring in years, positioning the company to capture demand from AI-driven data center expansion and grid modernization — two markets where capital spending is projected to exceed $500 billion globally by 2028.
SpinCo Targets AI Infrastructure Boom
SpinCo will focus on digital and electrical infrastructure solutions supporting AI data centers and mission-critical applications. Following the separation, Flex will continue as an advanced manufacturing company serving diversified end markets while emphasizing portfolio optimization, cash flow generation and shareholder returns.
The EP² acquisition expands Flex's Critical Power portfolio by adding engineered-to-order electrical power control and protection systems for utility, power generation and data center customers. The deal strengthens Flex's presence in grid modernization and electrification while increasing exposure to long-cycle, margin-accretive programs.
Prior acquisitions, including JetCool Technologies and Crown Technical Systems, had already enhanced Flex's direct-to-chip liquid cooling and critical power solutions for data centers. Combined with EP², Flex now offers end-to-end solutions spanning power distribution, switchgear, thermal management and integrated rack-scale systems.
Competitive Landscape Heats Up
Flex's restructuring comes as rivals also pursue AI infrastructure exposure. Jabil Inc. is benefiting from strength in AI data center infrastructure and capital equipment markets, with fiscal 2026 revenue now projected at $34 billion, up from a prior estimate of $32.4 billion. Sanmina Corp. reported core revenue rose 7.3 percent year over year in its second quarter, reaching $4 billion in quarterly revenue for the first time since integrating ZT Systems.
Flex shares have surged 68.9 percent in the past month, far outpacing the Electronics-Miscellaneous Products industry's 19.5 percent gain. The stock trades at a forward price-to-earnings ratio of 36.22, above the industry average of 32.54.
The separation and acquisition are expected to unlock shareholder value through the SpinCo entity, potentially attracting new investor interest as the market re-rates Flex's sum-of-parts valuation. Flex said it expects the transactions to position both entities for sustained growth as AI data center capital expenditure accelerates through 2027 and beyond.
This article is for informational purposes only and does not constitute investment advice.
