GT Advanced Technologies Settles Dispute With Apple
By PATRICK SEITZ, INVESTOR'S BUSINESS DAILY
Posted 12:44 PM ET
GT Advanced Technologies has reached a settlement agreement with Apple (NASDAQ:AAPL) under which GT will exit the sapphire glass manufacturing business and pay back Apple for the money it was advanced.
GT Advanced filed for Chapter 11 bankruptcy protection on Oct. 6. The Merrimack, N.H.-based company reportedly was having problems producing sapphire display covers for future iPhones and Apple Watches, and was missing milestones under its supply agreement with Apple.
Under the agreement announced Thursday , GT Advanced will exit from the market as a producer of sapphire materials and will refocus its business as an equipment supplier, manufacturing and developing sapphire growth systems and processes. As such, it will wind down sapphire materials production at its Mesa, Ariz., and Salem, Mass., locations.
If the agreement is approved by the bankruptcy court, GT Advanced will retain ownership of all production, ancillary and inventory assets located at the Mesa factory and will sell its advanced sapphire furnaces to repay Apple. GT will reimburse Apple for its $439 million prepayment over a period of up to four years without interest. The agreement will release GT from "all exclusivity obligations under its various agreements with Apple."
The agreement also allows GT to retain control of its intellectual property.
GT and Apple will continue their technical exchange involving the development of processes for growing next-generation sapphire boules, GT said in a press release.
"We are pleased with the settlement that we have negotiated with Apple," GT Advanced CEO Tom Gutierrez said in a statement. "We realize that our filing for Chapter 11 protection has caused uncertainty and hardship for many of our important stakeholders. We have been working diligently to develop a restructuring plan that will allow us to emerge from Chapter 11 as quickly as possible and with the operating flexibility and resources to position GT for long-term success.
"This agreement with Apple is an important step in that direction, as it will allow us to monetize our advanced sapphire growth and fabrication technologies in an unrestricted manner."
The agreement provides for a mutual release of any and all claims by both parties, GT said. GT will file a motion seeking bankruptcy-court approval of the settlement agreement on Monday. The court is scheduled to hear the motion on Nov. 25.
After GT Advanced filed for bankruptcy, Pacific Crest Securities analyst Weston Twigg said it was possible that Apple could take possession of the sapphire furnaces it funded and gain access to GT intellectual property that would allow Apple to produce sapphire display covers on its own.
In a bankruptcy-court filing, GT said that its agreements with Apple to make sapphire for iPhone screens were "oppressive and burdensome," the Wall Street Journal reported. "The cash burn at (GT's) sapphire-manufacturing operations for the benefit of Apple is not sustainable," GT said.
The bankruptcy-court case had threatened to expose details of Apple's business dealings with suppliers. Apple was pushing to keep its contracts with GT Advanced secret, the San Jose Mercury-News reported.
