As filed with the Securities and Exchange Commission on as filed on November 20, 2006

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2

to
FORM S-4

REGISTRATION STATEMENT

Under
THE SECURITIES ACT OF 1933

Benchmark Electronics, Inc.

(Exact name of registrant as specified in its charter)

 

3000 Technology Drive
Angleton, Texas 77515
Telephone: (979) 849-6550

(Address, including Zip code, and telephone number, including
area code, of registrant’s principal executive offices)

Cary T. Fu
3000 Technology Drive
Angleton, Texas 77515
Telephone: (979) 849-6550

(Name, address, including Zip code, and telephone number,
including area code, of agent for service)

Copies to:

 

Approximate date of commencement of proposed sale of the securities to the public: Upon consummation of the merger.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

3535 Technology Drive, N.W.
Rochester, Minnesota 55901

November 20, 2006

Dear Shareholder:

You are cordially invited to attend a special meeting of the shareholders of Pemstar Inc. to be held at 3535 Technology Drive, N.W., Rochester, Minnesota, on December 20, 2006, at 10:00 a.m., Central Time.

As described in the enclosed proxy statement/prospectus, at the special meeting you will be asked to consider and vote upon a proposal to adopt an Agreement and Plan of Merger that Pemstar entered into on October 16, 2006, with Benchmark Electronics, Inc. and Autobahn Acquisition Corp., a wholly-owned subsidiary of Benchmark. Autobahn is a corporation that was incorporated solely to facilitate the merger. If holders of record of a majority of Pemstar outstanding common stock, as of November 15, 2006, vote to adopt the merger agreement, and the other conditions in the merger agreement are satisfied or waived, Autobahn will be merged with and into Pemstar and Pemstar will become a wholly-owned subsidiary of Benchmark.

As further described in this proxy statement/prospectus, in the merger each Pemstar shareholder will receive the right to 0.160 of a share of Benchmark common stock, plus cash for any fractional shares, in exchange for each outstanding share of Pemstar common stock immediately prior to the completion of the merger.

Benchmark common stock is listed on the New York Stock Exchange under the trading symbol “BHE.” On October 16, 2006, the closing sale price of Benchmark common stock was $28.93. Based on that closing price, the value of the per share consideration to be received by Pemstar shareholders would be $4.63.

Pemstar’s board of directors and a special committee have determined that the merger is fair to and in the best interests of the Pemstar shareholders, and have unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, the Pemstar board of directors and the special committee recommend that the Pemstar shareholders vote “FOR” adoption of the merger agreement.

Your vote is very important, regardless of the number of shares you own. Pemstar cannot complete the merger unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of Pemstar’s common stock. Because the affirmative vote required to adopt the merger agreement is based upon the total number of outstanding shares of Pemstar common stock, the failure to submit a proxy card or to vote online via the Internet, by telephone or in person, or the abstention from voting by a shareholder will have the same effect as a vote “AGAINST” adoption of the merger agreement.

The accompanying notice of special meeting, proxy statement/prospectus and proxy card explain the proposed merger and provide specific information concerning the special meeting. Please read these materials carefully. In particular, please read “Risk Factors” beginning on page 10.

 

Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved the merger described in this proxy statement/prospectus or the Benchmark common stock to be issued in connection with the merger or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated November 20, 2006
and is first being mailed to shareholders of Pemstar on or about November 20, 2006

 

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about Benchmark and Pemstar from documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

If you would like to request documents, please do so by December 6, 2006 in order to receive them before the special meeting.

See “Where You Can Find More Information” on page 71.

PEMSTAR INC.
3535 TECHNOLOGY DRIVE N.W.
ROCHESTER, MN 55901

NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON December 20, 2006

TO THE SHAREHOLDERS OF PEMSTAR INC.:

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of PEMSTAR Inc. (“Pemstar”) will be held at 3535 Technology Drive N.W., Rochester, Minnesota on December 20, 2006, at 10:00 a.m. Central Time, to consider and vote upon a proposal to adopt an Agreement and Plan of Merger dated as of October 16, 2006, by and among Benchmark Electronics, Inc., a Texas corporation (“Benchmark”), Autobahn Acquisition Corp., a Minnesota corporation and wholly-owned subsidiary of Benchmark (“Merger Sub”), and Pemstar. Pursuant to the terms of the merger agreement, Merger Sub will be merged with and into Pemstar, Pemstar will become a wholly-owned subsidiary of Benchmark and all outstanding shares of common stock of Pemstar will be converted into the right to receive shares of Benchmark common stock.

The merger is more fully described in, and the merger agreement is attached in its entirety to, the proxy statement/prospectus which accompanies this notice.

Pemstar shareholders of record at the close of business on November 15, 2006 are the only persons entitled to notice of and to vote at the special meeting or any postponement or adjournment thereof.

Your attention is directed to the accompanying proxy statement/prospectus. Whether or not you plan to be personally present at the special meeting, please complete, sign, date and mail the enclosed proxy card as promptly as possible in order to save us further solicitation expense. If you later desire to revoke your proxy, you may do so at any time before it is exercised. Please return your proxy card in the enclosed envelope for which no postage is required if mailed in the United States.

 

TABLE OF CONTENTS

		Page
QUESTIONS AND ANSWERS ABOUT THE MERGER			Q-1
SUMMARY			1
General			1
The Special Meeting			3
The Merger			3
The Companies			5
Market Prices and Dividend Information			6
Comparative Per Share Information			6
Selected Historical Consolidated Financial Data of Benchmark			8
Selected Historical Consolidated Financial Data of Pemstar			8
Selected Unaudited Pro Forma Condensed Consolidated Financial Information			9
RISK FACTORS RELATING TO THE MERGER			10
THE SPECIAL MEETING			12
Date, Time and Place			12
Purpose of the Special Meeting			12
Record Date; Required Vote; Quorum			12
Shares Owned by Pemstar Directors and Executive Officers			12
Voting of Proxies			12
Revocability of Proxies			13
Solicitation of Proxies			13
THE COMPANIES			14
Benchmark			14
Pemstar			14
THE MERGER			15
Background to the Merger			15
Reasons for the Merger and Recommendation of the Pemstar Board of Directors			18
Opinion of Pemstar’s Financial Advisor			20
Interests of Pemstar Directors and Executive Officers in the Merger			29
Form of the Merger			31
Merger Consideration			31
Ownership of Benchmark Following the Merger			32
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares			32
Effective Time of the Merger			33
Stock Exchange Listing of Benchmark Common Stock			33
Delisting and Deregistration of Pemstar Common Stock			33
Material United States Federal Income Tax Consequences of the Merger			33
Regulatory Matters			35
Dissenters’ Rights			35
Pemstar Employee Benefits and Other Employee Matters			36
Treatment of Stock Options			36
Indemnification and Insurance			36
Resale of Benchmark Common Stock			37
THE MERGER AGREEMENT			38
Conditions to the Completion of the Merger			38
Important Definitions			39
No Solicitation			40
Termination of the Merger Agreement			42

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Fees and Expenses			43
Conduct of Business Pending the Merger			44
Representations and Warranties			47
Benchmark’s Right to Require Pemstar to Hold the Pemstar Shareholders’ Meeting			48
Commercially Reasonable Efforts			48
Articles of Incorporation and By-laws of the Surviving Corporation			48
Amendment			49
Extension; Waiver			49
Specific Enforcement			49
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			50
COMPARATIVE STOCK PRICES AND DIVIDENDS			56
DESCRIPTION OF BENCHMARK CAPITAL STOCK			57
COMPARISON OF RIGHTS OF COMMON SHAREHOLDERS OF BENCHMARK AND COMMON SHAREHOLDERS OF PEMSTAR			58
LEGAL MATTERS			70
EXPERTS			70
OTHER MATTERS			70
FUTURE SHAREHOLDER PROPOSALS			70
WHERE YOU CAN FIND MORE INFORMATION			71
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			73

 

Annexes
Annex I—Agreement and Plan of Merger
Annex II—Opinion of Piper Jaffray

 

ii

QUESTIONS AND ANSWERS ABOUT THE MERGER

The following are some questions that you, as a shareholder of Pemstar, may have regarding the merger and the answers to those questions. Pemstar shareholders are urged to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the issuance of Benchmark common stock to Pemstar shareholders pursuant to the merger. Additional important information is also contained in the annexes to and the documents incorporated by reference in this proxy statement/prospectus.

Q:   What am I being asked to vote on?

A:   You are being asked to vote to adopt the merger agreement entered into among Pemstar, Benchmark and Merger Sub, a wholly owned subsidiary of Benchmark. In the merger, Merger Sub will be merged with and into Pemstar.

Q:   What will happen to Pemstar as a result of the merger?

A:   If the merger is completed, Pemstar will become a wholly owned subsidiary of Benchmark.

Q:   What will I receive in the merger?

A:   Upon completion of the merger, you will receive for each share of Pemstar common stock 0.160 of a share of Benchmark common stock.

Q:   Does the Pemstar board of directors support the merger?

A:   Yes. The Pemstar board of directors and a special committee of the Pemstar board of directors formed in accordance with Section 302A.673 of the Minnesota Business Corporation Act (the “Special Committee”) have determined that the merger is fair to and in the best interests of the Pemstar shareholders, and have unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, the Pemstar board of directors and the Special Committee recommend that Pemstar shareholders vote “FOR” adoption of the merger agreement.

Q:   Where and when is the special meeting of shareholders?

A:   The special meeting is scheduled to take place at 3535 Technology Drive, N.W., Rochester, Minnesota, on December 20, 2006 at 10:00 a.m. Central Time.

Q:   Who can vote at the special meeting?

A:   You can vote at the special meeting if you owned shares of Pemstar common stock at the close of business on November 15, 2006, the record date for the special meeting. As of the close of business on that day, 45,526,599 shares of Pemstar common stock were outstanding.

Q:   What do I need to do now?

A:   After carefully reading and considering the information contained in this proxy statement/prospectus, please complete, sign and date your proxy and return it in the enclosed postage-paid return envelope or submit your proxy by telephone or on the Internet as soon as possible, so that your shares may be represented at the special meeting. If you sign and send in your proxy and do not indicate how you want to vote, we will count your proxy as a vote in favor of adoption of the merger agreement. The failure by the holder of any such shares to submit a proxy or to vote in person at the special meeting, including abstentions and broker non-votes, will have the same effect as if you voted “AGAINST” the adoption of the merger agreement.

Q-1

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Q:   Can I change my vote after I have mailed my signed proxy?

A:   Yes. You can change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can complete and submit a new valid proxy bearing a later date by Internet, telephone or mail. If you choose to send a written notice or to mail your new proxy, you must submit your notice of revocation or your new proxy to Pemstar at 3535 Technology Drive, N.W., Rochester, Minnesota 55901, Attention: Secretary. Third, you can attend the special meeting and vote in person. Attendance at the special meeting will not in and of itself constitute revocation of a proxy.

Q:   If my Pemstar shares are held in “street name” by my broker, will my broker vote my shares for me?

A:   Your broker will vote your Pemstar shares only if you provide instructions on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without instructions, your shares will not be voted and will have the same effect as if you voted “AGAINST” the adoption of the merger agreement.

Q:   Should I send in my stock certificates now?

A:   No. After the merger is completed, you will receive a transmittal form with instructions for the surrender of Pemstar common stock certificates. Please do not send in your stock certificates with your proxy.

Q:   Is the merger expected to be taxable to me?

A:   The merger has been structured to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and it is a closing condition to the merger that Benchmark and Pemstar receive opinions of their respective counsel regarding such qualification. As a result of the merger’s qualification as a reorganization, Pemstar shareholders will not recognize gain or loss for United States federal income tax purposes upon the exchange of shares of Pemstar common stock for shares of Benchmark common stock, except with respect to cash received in lieu of fractional shares of Benchmark common stock.

You should read “The Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 33 for a more complete discussion of United States federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.

Q:   When do you expect the merger to be completed?

A:   We are working to complete the merger as quickly as possible. If adopted by Pemstar shareholders, it is anticipated that the merger will be completed in the first calendar quarter of 2007. However, it is possible that factors outside our control could require us to complete the merger at a later time or not complete it at all.

Q:   Can I dissent and require appraisal of my shares?

A:   No. Pemstar shareholders do not have dissenters’ rights under Minnesota law in connection with the merger.

Q:   Who can help answer my questions?

A:   If you have any questions about the merger or if you need additional copies of this proxy statement/prospectus or the enclosed proxy, you should contact:

Morrow & Co., Inc.

470 West Avenue

3rd Floor

Stamford, CT 06902

800-607-0088

Q-2

SUMMARY

This summary highlights selected information from this proxy statement/prospectus and may not contain all the information that is important to you. To understand the merger fully and for a more complete description of the legal terms of the merger, you should carefully read this entire proxy statement/prospectus and the other documents to which we refer you, including, in particular, the copies of the merger agreement and the opinion of Piper Jaffray that are attached to this proxy statement/prospectus as Annexes I and II, respectively. See also “Where You Can Find More Information” on page 71. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

General

What Pemstar Shareholders Will Receive in the Merger (page 31)

In the merger, holders of Pemstar common stock will receive, for each share of common stock they own, 0.160 of a share of Benchmark common stock. The Benchmark common stock to be received in the merger is referred to as the “merger consideration” in this proxy statement/prospectus.

Treatment of Stock Options (page 36)

The vesting of each option to acquire Pemstar common stock held by employees, including officers, and non-employee directors of Pemstar will be accelerated as a result of the transaction.

Each stock option held by a Pemstar employee immediately prior to the effective time of the merger will be converted into an option to acquire, on the same terms and conditions as were applicable under such Pemstar stock option (taking into account the acceleration of vesting occurring as a result of the transaction), the number of shares of Benchmark common stock determined by multiplying the number of shares of Pemstar common stock subject to such Pemstar option immediately prior to the effective time of the merger by the exchange ratio in the merger, at an exercise price per share equal to the per share exercise price of the Pemstar stock option divided by the exchange ratio in the merger. The number of shares will be rounded down to the nearest whole share, the exercise price will be rounded up to the nearest whole cent, and any options intended to qualify as incentive stock options (as defined in Section 422 of the Code) (“ISOs”) will be adjusted in a manner intended to preserve their qualification as ISOs.

Each stock option held by a Pemstar non-employee director immediately prior to the effective time of the merger will be canceled in exchange for a single lump sum cash payment equal to the product of (1) the number of shares of Pemstar common stock subject to such Pemstar stock option immediately prior to the effective time of the merger and (2) the excess, if any, of (i) the product of (A) the exchange ratio in the merger and (B) the per share closing price of Benchmark common stock, as such price is reported on the New York Stock Exchange Composite Transactions Tape on the date that is two days prior to the closing date of the merger over (ii) the per share exercise price of such stock option.

Ownership of Benchmark Following the Merger (page 32)

Based on the number of outstanding shares of Pemstar common stock on the record date and the number of outstanding shares of Benchmark common stock on November 15, 2006, we anticipate that Pemstar shareholders will own approximately 11% of the outstanding shares of Benchmark common stock following the merger.

Material United States Federal Income Tax Consequences of the Merger (page 33)

Benchmark and Pemstar have structured the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to completion of the merger that Benchmark

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receive an opinion from Cravath, Swaine & Moore LLP and Pemstar receive an opinion from Dorsey & Whitney LLP, in each case dated as of the closing date of the merger, that the merger will qualify as such a reorganization, and that Benchmark, Merger Sub and Pemstar will each be a party to that reorganization within the meaning of Section 368(b) of the Code. If the merger qualifies as a reorganization, a Pemstar shareholder generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of its shares of Pemstar common stock for shares of Benchmark common stock. However, any cash received in lieu of a fractional share of Benchmark common stock will result in the recognition of gain or loss as if such shareholder sold its fractional share. A Pemstar shareholder’s aggregate adjusted tax basis in the shares of Benchmark common stock that it receives in the merger generally will equal its current aggregate adjusted tax basis in its Pemstar common stock (excluding the portion of such adjusted tax basis allocable to any Benchmark fractional share interest for which it receives cash). Shareholders are urged to consult their own tax advisor to determine the particular U.S. federal, state or local or foreign income or other tax consequences to them of the merger.

Recommendation of the Pemstar Board of Directors (page 18)

After careful consideration, Pemstar’s board of directors and the Special Committee have determined that the merger is fair to and in the best interests of the Pemstar shareholders, and have unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, the Pemstar board of directors and the Special Committee recommend that the Pemstar shareholders vote “FOR” adoption of the merger agreement.

Opinion of Piper Jaffray (page 20 and Annex II)

Piper Jaffray & Co (“Piper Jaffray”) delivered its opinion to the Pemstar board of directors that, as of the date of its opinion and based upon and subject to the assumptions made, matters considered and limits of the review undertaken by it, the merger consideration to be received by the holders of Pemstar shares (other than Benchmark and its affiliates) pursuant to the proposed merger agreement was fair, from a financial point of view, to such shareholders.

The full text of Piper Jaffray’s written opinion, dated October 16, 2006, is attached as Annex II to this proxy statement/prospectus. Pemstar shareholders are encouraged to read Piper Jaffray’s opinion carefully in its entirety, including the description of the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Piper Jaffray in rendering its opinion. The opinion addresses only the fairness of the merger consideration to Pemstar shareholders from a financial point of view, does not address the merits of the underlying decision by Pemstar to engage in the merger and does not constitute a recommendation to any Pemstar shareholder as to how to vote on the proposal to adopt the merger agreement.

Interests of Pemstar Directors and Executive Officers in the Merger (page 29)

In considering the recommendation of the Pemstar board of directors with respect to the merger agreement and the merger, you should be aware that some of Pemstar’s directors and executive officers have interests in the merger and may have arrangements that are different from, or in addition to, those of the Pemstar shareholders generally. The Pemstar board of directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement and the merger and to recommend that the Pemstar shareholders vote in favor of adoption of the merger agreement.

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Comparison of Rights of Common Shareholders of Benchmark and Common Shareholders of Pemstar (page 58)

Pemstar shareholders, whose rights are currently governed by the Pemstar articles of incorporation, as amended (the “Pemstar articles of incorporation”), the Pemstar amended and restated by-laws (the “Pemstar by-laws”) and Minnesota law, will, upon completion of the merger, become shareholders of Benchmark and their rights will be governed by the Benchmark amended and restated articles of incorporation, as amended (the “Benchmark articles of incorporation”), the Benchmark amended and restated by-laws (the “Benchmark by-laws”) and Texas law.

The Special Meeting (page 12)

The special meeting of Pemstar shareholders will be held at 3535 Technology Drive N.W., Rochester, Minnesota on December 20, 2006, at 10:00 a.m. Central Time. At the special meeting, Pemstar shareholders will be asked to adopt the merger agreement and to transact such other business as may properly come before the meeting.

Record Date; Voting Power (page 12)

Pemstar shareholders are entitled to vote at the special meeting if they owned shares of Pemstar as of the close of business on November 15, 2006, the record date.

On the record date, there were 45,526,599 shares of Pemstar common stock entitled to vote at the special meeting. Shareholders will have one vote at the special meeting for each share of Pemstar common stock that they owned on the record date.

Vote Required (page 12)

Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote.

Shares Owned by Pemstar Directors and Executive Officers (page 12)

On the record date, directors and executive officers of Pemstar beneficially owned and were entitled to vote approximately 5,983,002 shares of Pemstar common stock, which represented approximately 13% of the shares of Pemstar common stock outstanding on that date.

The Merger (page 38)

The merger agreement is attached as Annex I to this proxy statement/prospectus. We encourage you to read the merger agreement because it is the principal document governing the merger.

Conditions to the Completion of the Merger (page 38)

Pemstar and Benchmark are obligated to complete the merger only if they satisfy several conditions, including the following:

·       the merger agreement has been adopted by the affirmative vote of a majority of the voting power of the shares of Pemstar common stock issued and outstanding on the record date;

·       the shares of Benchmark common stock to be issued in the merger have been approved for listing on the New York Stock Exchange, subject to official notice of issuance;

·       the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or has been terminated;

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·       no temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any court of competent jurisdiction or statute, law, rule, other legal restraint or prohibition is in effect preventing the consummation of the merger;

·       the registration statement, of which this proxy statement/prospectus forms a part, has been declared effective and is not the subject of any stop order or pending or threatened proceedings seeking a stop order;

·       the receipt of a written opinion from Benchmark’s and Pemstar’s counsel to the effect that the merger will be treated for U.S. Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and that Benchmark, Merger Sub and Pemstar will each be a party to that reorganization within the meaning of Section 368(b) of the Code; and

·       other contractual conditions set forth in the merger agreement.

In addition, Benchmark is obligated to complete the merger only if:

·       there is no pending or overtly threatened suit, action or proceeding by any governmental entity (or by any other person having a reasonable likelihood of prevailing in a manner contemplated in the three sub-bullets below):

—              challenging the acquisition by Benchmark or Merger Sub of any shares of Pemstar common stock, seeking to restrain or prohibit the consummation of the merger or any other transaction contemplated by the merger agreement, or seeking to place limitations on the ownership of shares of Pemstar common stock (or shares of common stock of the surviving corporation) by Benchmark, Merger Sub or any other affiliate of Benchmark or seeking to obtain from Pemstar, Benchmark, Merger Sub or any other affiliate of Benchmark any damages that are material in relation to Pemstar;

—              seeking to prohibit or materially limit the ownership or operation by Pemstar, Benchmark or any of their respective subsidiaries of any portion of any business or of any assets of Pemstar, Benchmark or any of their respective subsidiaries, or to compel Pemstar, Benchmark or any of their respective subsidiaries to divest or hold separate any portion of any business or of any assets of Pemstar, Benchmark or any of their respective subsidiaries, in each case, as a result of the merger; or

—              seeking to prohibit Benchmark or any of its affiliates from effectively controlling in any material respect the business or operations of Pemstar or any of its subsidiaries;

·       no restraint is in effect that could reasonably be expected to result, directly or indirectly, in any of the effects referred to in the three preceding sub-bullets; and

·       Pemstar has obtained all consents, approvals and waivers set forth in the Pemstar disclosure schedule, and these consents, approvals and waivers are in full force and effect on the closing date.

For a more complete description of the conditions to completion of the merger, see “The Merger Agreement—Conditions to the Completion of the Merger.”

Termination of the Merger Agreement; Termination Fee (pages 42 and 43)

The merger agreement contains provisions addressing the circumstances under which Benchmark or Pemstar may terminate the merger agreement. In addition, the merger agreement provides that, in several circumstances, Pemstar may be required to pay Benchmark a termination fee of $12 million. For a more complete description, see “The Merger Agreement—Termination of the Merger Agreement” and “—Fees and Expenses.”

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Commercially Reasonable Efforts (pages 48)

Under the merger agreement, Benchmark and Pemstar have agreed to use commercially reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, and to assist and cooperate with the other parties in doing all things necessary, proper or advisable to consummate and make effective the merger and the other transactions contemplated by the merger agreement in the most expeditious manner practicable.

Regulatory Matters (page 35)

United States antitrust laws prohibit Benchmark and Pemstar from completing the merger until they have furnished certain information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission, and a required waiting period has ended. Benchmark and Pemstar filed the required notification and report forms with the Antitrust Division of the Department of Justice and the Federal Trade Commission on October 26, 2006.

Fees and Expenses (page 43)

Each of Benchmark and Pemstar will pay its own fees and expenses in connection with the merger. However, Benchmark and Pemstar will share equally all fees and expenses, other than attorneys’ and accounting fees and expenses, incurred in relation to the filing, printing and mailing of this proxy statement/prospectus. In addition, each party will reimburse the other party if the merger agreement is terminated because of the other party’s failure to perform any of its representations, warranties, covenant or agreements set forth in the merger agreement that would give rise to a failure of a condition and is incapable of being cured (or is not cured).

The Companies (page 14)

Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas  77515
Telephone: (979) 849-6550

Benchmark, incorporated in Texas in 1981, is in the business of manufacturing electronics and provides services to original equipment manufacturers (“OEMs”) of computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment. These services are commonly referred to as electronics manufacturing services (“EMS”). Benchmark offers its customers comprehensive and integrated design and manufacturing services, from initial product design to volume production and direct order fulfillment. Benchmark also provides specialized engineering services, including product design, printed circuit board layout, prototyping and test development.

Pemstar Inc.
3535 Technology Drive, N.W.
Rochester, Minnesota 55901
Telephone: (507) 535-4104

Pemstar, incorporated in Minnesota in 1994, provides a comprehensive range of global engineering, product design, automation and test, manufacturing and fulfillment services to its customers in the industrial equipment, medical, computing and data storage, and communications industries. Pemstar provides these services on a global basis through eleven strategic locations in the Americas, Asia, and Europe. These integrated service offerings support its customers’ needs from initial product development and design through manufacturing to worldwide distribution and aftermarket support.

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Market Prices and Dividend Information (page 56)

Shares of Benchmark common stock are listed on the New York Stock Exchange. Shares of Pemstar common stock are listed on the Nasdaq Global Market. The following table presents:

·       the last reported sale price of a share of Benchmark common stock, as reported by the New York Stock Exchange Composite Transactions Tape,

·       the last reported sale price of a share of Pemstar common stock, as reported by the Nasdaq Global Market, and

·       the market value of Pemstar common stock on an equivalent price per share basis, as determined by reference to the value of the merger consideration to be received in respect of each share of Pemstar common stock in the merger,

in each case on October 16, 2006, the last full trading day prior to the public announcement of the merger, and on November 17, 2006, the latest practicable date before the date of this proxy statement/prospectus.

 

These prices will fluctuate prior to the special meeting and the consummation of the merger, and shareholders are urged to obtain current market quotations prior to making any decision with respect to the merger.

Neither Benchmark nor Pemstar has declared or paid any dividends on its respective shares of common stock. See “Comparative Stock Prices and Dividends.”

Comparative Per Share Information

The following tables set forth for the periods presented certain per share data of Benchmark and Pemstar on a historical basis and on an unaudited pro forma basis after giving effect to the merger under the purchase method of accounting. The historical per share data of Benchmark and Pemstar has been derived from, and should be read in conjunction with, the historical financial statements of Benchmark and Pemstar incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information.” The unaudited pro forma per share data has been derived from, and should be read in conjunction with, the unaudited pro forma condensed consolidated financial statements included elsewhere in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Consolidated Financial Statements.”

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The Pemstar unaudited pro forma equivalent data was calculated by multiplying the corresponding Benchmark unaudited pro forma consolidated data by the exchange ratio of 0.160. This data shows how each share of Pemstar common stock would have participated in net income and book value of Benchmark if the companies had always been consolidated for accounting and financial reporting purposes for all periods presented. These amounts, however, are not intended to reflect future per share levels of net income and book value of Benchmark.

 

 

 

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Selected Historical Consolidated Financial Data of Benchmark

The following selected consolidated financial information of Benchmark, as of and for each of the five fiscal years in the period ended December 31, 2005, has been derived from Benchmark’s audited historical financial statements incorporated by reference in this proxy statement/prospectus. The financial statements for those periods were audited by KPMG LLP, an independent registered public accounting firm. The selected financial information as of and for the nine-month periods ended September 30, 2006 and 2005, has been derived from Benchmark’s unaudited consolidated financial statements. This information is only a summary and should be read in conjunction with management’s discussion and analysis of results of operations and financial condition of Benchmark and the consolidated financial statements and notes thereto of Benchmark incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

 

 

Selected Historical Consolidated Financial Data of Pemstar

The following selected consolidated financial information of Pemstar, as of and for each of the five fiscal years in the period ended March 31, 2006, has been derived from Pemstar’s audited historical financial statements incorporated by reference in this proxy statement/prospectus. The consolidated financial statements for annual periods ended March 31, 2005 and following were audited by Grant Thornton LLP, an independent registered public accounting firm. The consolidated financial statements for periods ended March 31, 2004 and prior were audited by Ernst & Young LLP, an independent registered public accounting firm. The selected financial information as of and for the six-month periods ended September 30, 2006 and 2005, has been derived from Pemstar’s unaudited consolidated financial statements. This information is only a summary and should be read in conjunction with management’s discussion and analysis of results of operations and financial condition of Pemstar and the consolidated financial statements and notes thereto of Pemstar incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

 

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Selected Unaudited Pro Forma Condensed Consolidated Financial Information

The following selected unaudited pro forma condensed consolidated financial information is based upon Benchmark’s and Pemstar’s historical consolidated financial information incorporated by reference in this proxy statement/prospectus, and has been prepared to reflect the proposed merger based on the purchase method of accounting. The historical consolidated financial information has been adjusted to give effect to pro forma events that are directly attributable to the merger or considered intercompany transactions and factually supportable. The selected unaudited pro forma condensed consolidated financial information is derived from the unaudited pro forma condensed consolidated financial statements contained elsewhere in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Consolidated Financial Statements.” The unaudited pro forma condensed consolidated statements of income, which have been prepared for the nine months ended September 30, 2006 and for the year ended December 31, 2005, give effect to the merger as if it had occurred on January 1, 2005. The unaudited pro forma condensed consolidated balance sheet has been prepared as of September 30, 2006 and gives effect to the merger as if it had occurred on that date.

The unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the merger been completed at the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of Benchmark after completion of the merger.

The unaudited pro forma condensed consolidated financial information was prepared using the purchase method of accounting with Benchmark treated as the acquiror. The unaudited pro forma condensed consolidated financial information does not give effect to any potential cost savings or other operating efficiencies that could result from the merger. In addition, Benchmark’s cost to acquire Pemstar will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. The allocation is dependent upon valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase price allocation pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed consolidated financial information in this proxy statement/prospectus.

 

 

 

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RISK FACTORS RELATING TO THE MERGER

In addition to the other information included and incorporated by reference in this proxy statement/prospectus, Pemstar shareholders should consider carefully the matters described below in determining whether to adopt the merger agreement.

The exchange ratio will not be adjusted in the event that the value of Benchmark common stock declines before the merger is completed. As a result, the value of the shares of Benchmark common stock at the time that Pemstar shareholders receive them could be less than the value of those shares today. In the merger, Pemstar shareholders will be entitled to receive for each of their shares of Pemstar common stock 0.160 of a share of Benchmark common stock. Benchmark and Pemstar will not adjust the exchange ratio as a result of any change in the market price of Benchmark common stock between the date of this proxy statement/prospectus and the date that Pemstar shareholders receive shares of Benchmark common stock in exchange for their shares of Pemstar common stock. The market price of Benchmark common stock will likely be different, and may be lower, on the date Pemstar shareholders receive their shares of Benchmark common stock than the market price of shares of Benchmark common stock as of the date of this proxy statement/prospectus. Differences in Benchmark’s stock price may be the result of changes in the business, operations or prospects of Benchmark, market reactions to the proposed merger, regulatory considerations, general market and economic conditions or other factors. If the market price of Benchmark common stock declines after Pemstar shareholders vote, Pemstar shareholders will receive less value than expected at the time of the vote.

The price of Benchmark common stock may be affected by factors different from those affecting the price of Pemstar common stock. Upon completion of the merger, holders of Pemstar common stock will become holders of Benchmark common stock. Benchmark’s business, results of operations and prospects and the price of Benchmark common stock may be affected by factors different than those affecting Pemstar’s business, results of operations and prospects and the price of Pemstar common stock. For a discussion of Benchmark’s and Pemstar’s businesses and factors to consider in connection with such businesses, see Benchmark’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and Pemstar’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006, each of which is incorporated by reference in this proxy statement/prospectus.

The integration of Benchmark and Pemstar following the merger may present significant challenges.   Benchmark and Pemstar may face significant challenges in combining their operations in a timely and efficient manner and retaining key Pemstar personnel and customers. The failure to integrate Benchmark and Pemstar successfully and to manage successfully the challenges presented by the integration process may result in Benchmark not achieving the anticipated potential benefits of the merger.

Obtaining required approvals and satisfying closing conditions may delay or prevent completion of the merger. Completion of the merger is conditioned upon the receipt of all material governmental authorizations, consents, orders and approvals, including, without limitation, the expiration or termination of the applicable waiting periods, and any extension of the waiting periods, under the HSR Act and other required approvals. Benchmark and Pemstar intend to pursue all required approvals in accordance with the merger agreement. These consents, orders and approvals may impose conditions on or require divestitures relating to the divisions, operations or assets of Benchmark or Pemstar. Such conditions or divestitures may jeopardize or delay completion of the merger or may reduce the anticipated benefits of the merger. Further, no assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all such consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the merger agreement. See “The Merger Agreement—Conditions to the Completion of the Merger” for a discussion of the conditions to the

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completion of the merger and “The Merger—Regulatory Matters” for a description of the regulatory approvals necessary in connection with the merger.

Benchmark will incur transaction, integration and restructuring costs in connection with the merger.   Benchmark and Pemstar expect to incur costs associated with transaction fees and other costs related to the merger. Specifically, Benchmark expects to incur approximately $5 million for transaction costs related to the merger, which costs are expected to be recorded as a component of the purchase price. In addition, Benchmark will incur integration and restructuring costs following the completion of the merger as Benchmark integrates the businesses of Pemstar with those of Benchmark. Although Benchmark and Pemstar expect that the realization of efficiencies related to the integration of the businesses will offset incremental transaction, merger-related and restructuring costs over time, Benchmark cannot give any assurance that this net benefit will be achieved in the near term.

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THE SPECIAL MEETING

Date, Time and Place

This proxy statement/prospectus is being mailed to Pemstar shareholders on or about November 20, 2006 in connection with the solicitation of proxies by the board of directors of Pemstar for use at the special meeting of shareholders to be held at 3535 Technology Drive N.W., Rochester, Minnesota on December 20, 2006 at 10:00 a.m. Central Time, and at any adjournment or postponement thereof.

Purpose of the Special Meeting

Shareholders of Pemstar will consider and vote upon the proposal to adopt the merger agreement and to transact such other business as may properly come before the meeting or any properly reconvened meeting following an adjournment or postponement thereof.

The Pemstar board of directors and the Special Committee have determined that the merger is fair to and in the best interests of the Pemstar shareholders, and have unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. Accordingly, the Pemstar board of directors and the Special Committee recommend that the Pemstar shareholders vote “FOR” the adoption of the merger agreement.

Record Date; Required Vote; Quorum

The close of business on November 15, 2006 has been fixed as the record date for the determination of shareholders entitled to notice of, and to vote at, the special meeting and at any adjournment or postponement thereof. As of the record date, there were outstanding 45,526,599 shares of Pemstar common stock.

The adoption of the merger agreement requires the affirmative vote of a majority of the voting power of the shares of Pemstar common stock issued and outstanding on the record date. Shareholders will be entitled to one (1) vote per share of Pemstar common stock on all matters submitted for a vote at the special meeting.

The presence at the special meeting, in person or by proxy, of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast at the special meeting will constitute a quorum. Abstentions and broker non-votes (described below) are counted in determining whether a quorum is present. A broker non-vote occurs when a broker or other nominee holding shares for a beneficial owner does not receive voting instructions from the beneficial owner. Abstentions and broker non-votes, because they are not treated as votes cast, will have the same effect as votes “AGAINST” the proposal to adopt the merger agreement.

Shares Owned by Pemstar Directors and Executive Officers

On the record date, directors and executive officers of Pemstar beneficially owned and were entitled to vote approximately 5,983,002 shares of Pemstar common stock, which represented approximately 13% of the shares of Pemstar common stock outstanding on that date. Pemstar currently expects that Pemstar’s directors and officers will vote their shares in favor of the adoption of the merger agreement at the special meeting, although none of them has entered into any agreement obligating them to do so.

For information regarding the beneficial ownership of Pemstar common stock by certain beneficial owners and each current Pemstar director and executive officer, see Pemstar’s proxy statement used in connection with its 2006 annual meeting of shareholders, which is incorporated by reference in this proxy statement/prospectus.

Voting of Proxies

This proxy statement/prospectus is being sent to Pemstar shareholders on behalf of the board of directors of Pemstar for the purpose of requesting that you allow your shares of Pemstar common stock to be represented by the persons named in the enclosed proxy card. All shares of Pemstar common stock

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represented at the meeting by properly executed proxy cards will be voted in accordance with the instructions indicated on that proxy. If you sign and return a proxy card without giving voting instructions, your shares will be voted as recommended by the board of directors of Pemstar. The board of directors of Pemstar recommends a vote “FOR” the adoption of the merger agreement.

If you hold shares of record as a registered shareholder, please follow the voting instructions included on the enclosed proxy card. If your shares are held in “street name,” which means your shares are held of record by a broker, bank or other nominee, you will need to obtain instructions from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or other nominee to vote your shares. Many such firms make telephone and/or Internet voting available, but the specific processes available will depend on those firms’ individual arrangements.

Even if you plan to attend the special meeting, Pemstar recommends that you submit your proxy so that your vote will be counted even if you later decide not to attend the meeting. In addition, please note that if your shares are held in “street name,” and you wish to vote at the special meeting, you must bring to the special meeting a proxy from the record holder of the shares authorizing you to vote at the special meeting.

Pemstar does not expect that any matter other than the proposal to adopt the merger agreement will be brought before the special meeting. If, however, any other matter is properly presented at the special meeting or any properly reconvened meeting following an adjournment or postponement of the special meeting, the persons named as proxies in the proxy card will use their own judgment to determine how to vote your shares.

Revocability of Proxies

You may revoke your proxies at any time prior to the time the vote is taken at the special meeting. To revoke your proxy, you must either submit a signed notice of revocation to Pemstar’s Secretary at the address set forth on page 73, submit a later-dated proxy or attend the special meeting and vote your shares in person. Attendance at the special meeting does not by itself constitute the revocation of a proxy. If your shares are held in “street name,” you may change your vote by submitting new voting instructions to your broker, bank or other nominee in accordance with the procedures established by them. Please contact your broker, bank or other nominee and follow its directions in order to change your vote or revoke your proxy.

Solicitation of Proxies

The board of directors of Pemstar is soliciting proxies from its shareholders. Pemstar and Benchmark will each pay one-half of the fees and expenses, other than attorneys’ and accounting fees and expenses, incurred in relation to the printing, filing and distribution of this proxy statement/prospectus and the proxy cards to shareholders of Pemstar. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of Pemstar common stock beneficially owned by others to forward to such beneficial owners. Persons representing beneficial owners of Pemstar common stock may be reimbursed for their costs of forwarding solicitation materials to such beneficial owners. In addition to soliciting proxies by mail, directors, officers or employees of Pemstar and Benchmark may solicit proxies personally and by telephone, email or otherwise. None of these persons will receive additional or special compensation for soliciting proxies.

Pemstar has retained Morrow & Co., Inc. (“Morrow”) to assist in the solicitation of proxies for the special meeting and to verify the records relating to the solicitations.  Morrow will be paid a fee of approximately $12,000, plus reimbursement of its out-of-pocket expenses.  Morrow’s address and telephone numbers are as follows:

Morrow & Co., Inc.
470 West Avenue
3rd Floor
Stamford, CT 06902
800-607-0088

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THE COMPANIES

Benchmark

Benchmark is in the business of manufacturing electronics and provides services to OEMs of computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment. Benchmark offers its customers comprehensive and integrated design and manufacturing services, from initial product design to volume production and direct order fulfillment. Benchmark also provides specialized engineering services, including product design, printed circuit board layout, prototyping and test development.

Benchmark currently operates a total of 54 surface mount production lines (where electrical components are soldered directly onto printed circuit boards) at its domestic facilities and 61 surface mount production lines at its international facilities. Its worldwide facilities include 2.1 million square feet in its domestic facilities in Alabama, Colorado, Minnesota, New Hampshire, Oregon, Texas and Washington; and 0.8 million square feet in its international facilities in Brazil, China, Ireland, Mexico, Singapore and Thailand. Its facility in Loveland, Colorado will cease significant operations at the end of the fourth quarter of 2006.

Benchmark is a Texas corporation with its executive offices at 3000 Technology Drive, Angleton, Texas 77515. Its telephone number is (979) 849-6550.

Pemstar

Pemstar, incorporated in Minnesota in 1994, provides a comprehensive range of global engineering, product design, automation and test, manufacturing and fulfillment services to its customers in the industrial equipment, medical, computing and data storage, and communications industries. Pemstar provides these services on a global basis through eleven strategic locations in the Americas, Asia, and Europe. These integrated service offerings support its customers’ needs from initial product development and design through manufacturing to worldwide distribution and aftermarket support.

Pemstar is a Minnesota corporation with its executive offices at 3535 Technology Drive, N.W., Rochester, Minnesota 55901. Its telephone number is (507) 288-6720.

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THE MERGER

Background to the Merger

As participants in the electronics manufacturing services industry, the management of Benchmark and Pemstar are generally familiar with each other’s business. On an ongoing basis, each of Benchmark and Pemstar evaluates alternatives for achieving their long-term strategic goals of enhancing shareholder value.

During 2005 and 2006, Cary T. Fu, President and Chief Executive Officer of Benchmark, and Allen J. Berning, Chairman and Chief Executive Officer of Pemstar, had various discussions regarding the strategic fit between the two companies and the benefits of a potential merger. From these meetings the CEOs acknowledged that a strategic merger had merit. Also during 2005 and 2006, Pemstar engaged in a restructuring effort to address the issues caused by the continued challenges that Pemstar and much of the electronics manufacturing services industry had been experiencing since 2001. The positive results of this restructuring effort began to fully emerge in the summer of 2005, which set the stage for a further evaluation of the merits of a merger.

On April 25, 2005, Mr. Fu, Gayla J. Delly, Executive Vice President and Chief Financial Officer of Benchmark, Mr. Berning, Gregory S. Lea, Executive Vice President, Finance and Chief Financial Officer of Pemstar, and representatives of Needham & Company (“Needham”) met to discuss the potential for a business combination between Benchmark and Pemstar. Prior to these discussions, on April 19, 2005, Pemstar and Benchmark had entered into a confidentiality agreement. Also in April 2005, Credit Suisse Securities (USA) LLC (“Credit Suisse”) began working with Benchmark as its financial advisor in connection with a potential transaction with Pemstar.

On May 13, 2005, representatives of Needham met with Mr. Berning, Roy Bauer, President and Chief Operating Officer of Pemstar, and Shayn Carlson, Executive Director of Financial Planning and Investor Relations of Pemstar, to continue discussions regarding the potential for a business combination between Benchmark and Pemstar. Throughout June and July of 2005, members of Pemstar management held continued discussions with members of Benchmark management regarding the potential for a business combination between Benchmark and Pemstar.

On July 21, 2005, Pemstar engaged Needham as its exclusive financial advisor in connection with a potential transaction involving Benchmark or a similar party.

On July 28, 2005, Mr. Berning, Mr. Lea, Mr. Fu, and Ms. Delly and representatives of Needham met in Houston to continue discussions regarding the potential for a business combination between Benchmark and Pemstar. In connection with these discussions, representatives from Benchmark visited Pemstar’s facilities in Tianjin, China during August 2005. On August 4, 2005 at a regular meeting of the Pemstar board of directors, a pricing committee was re-established and Al Berning, Bruce Jaffe, Greg Lea and Ken Hendrickson were elected to the pricing committee, with Michael Odrich to serve as advisor to the committee (on May 4, 2006 Steve Snyder replaced Ken Hendrickson, in anticipation of Mr. Hendrickson's retirement from the Pemstar board of directors). On August 18, 2005, the pricing committee, together with Mr. Bauer and Bruce Borgerding, General Counsel of Pemstar, met to discuss a potential transaction with Benchmark.

On September 16, 2005, Mr. Berning, Mr. Lea, Mr. Fu and Ms. Delly held a conference call to continue discussions. Several weeks later, on October 28, 2005, Pemstar received a verbal, non-binding indication of interest from Benchmark to acquire Pemstar. A few days later, on October 31 and again on November 3, 2005, the pricing committee of the Pemstar board of directors held a special meeting with representatives of Needham to discuss the Benchmark verbal proposal. The pricing committee reported to the Pemstar board of directors during a special meeting on November 28, 2005, with representatives of Needham in attendance. At that meeting, the Pemstar board of directors authorized Needham to share with Benchmark and its financial advisor selected financial information relating to Pemstar. Also in the weeks following these meetings, the management of Pemstar studied potential transactions with other

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electronics manufacturing services companies. In particular, on December 8, 2005, Mr. Berning and Mr. Lea began meeting with and contacting other potential acquirers.

In the meantime, Benchmark continued to assess alternative acquisition transactions. These investigations eventually resulted in another meeting between officers of Pemstar and Benchmark on April 4, 2006. On May 13, 2006, Benchmark submitted a non-binding, verbal indication of interest to acquire Pemstar for $2.85 per share of Pemstar common stock on a fully-diluted basis. Pemstar countered with $3.65 per share on the same basis, and on June 1, 2006, members of Benchmark’s management confirmed receipt of Pemstar’s counter proposal and agreed to meet in person to discuss the counter proposal in further detail. Throughout June and July 2006, representatives of Pemstar and Benchmark met in various locations to perform due diligence and to discuss Benchmark’s most recent proposal and a potential transaction. During this period, on June 19, 2006, Benchmark submitted a non-binding, written indication of interest in acquiring Pemstar in a 100% cash tender offer, with no specific price per share or total enterprise value stated in the proposal. Similar to prior proposals, the proposed acquisition included conditions that would need to occur prior to the closing of the transaction, including completion of Benchmark due diligence.

On July 28, 2006, Benchmark submitted a further non-binding proposal in which Benchmark would acquire Pemstar in a 100% stock for stock transaction at a 10% premium per share of Pemstar common stock. The premium was proposed to be based on the average of the daily closing prices of Pemstar’s and Benchmark’s common stock in each of the 15 consecutive trading days immediately preceding the date that is three days prior to signing a definitive agreement.

On August 2, 2006, during a regular meeting of the board of directors of Pemstar, representatives from Needham discussed the Benchmark proposal with the Pemstar board of directors and reviewed discussions held to date with Benchmark. After being advised by legal counsel of their fiduciary duties under applicable law, the Pemstar board of directors unanimously approved submitting a counter-proposal to Benchmark for a 100% stock for stock transaction at an exchange ratio valued such that Pemstar would have 12% ownership and Benchmark would have 88% ownership of the combined company on a fully-diluted basis. On August 4, 2006, Pemstar submitted its non-binding counter-proposal to Benchmark’s July 28th proposal.

On August 9, 2006, Mr. Lea, Ms. Delly and representatives of Needham and Credit Suisse met in Houston to discuss Benchmark’s most recent proposal and Pemstar’s most recent counter-proposal. At the meeting, Mr. Lea and representatives of Needham indicated that any proposal that indicated a range of value would not be suitable, and that only a specific price per share or a specific exchange ratio would be suitable to present to Pemstar’s board of directors and to proceed with further discussions. After conferring with representatives of Credit Suisse, who were present at the meeting, and Mr. Fu, who was not present but available telephonically, Ms. Delly verbally offered a proposed exchange ratio of 0.160 of a share of Benchmark common stock for each share of Pemstar common stock on a fully-diluted basis. Mr. Lea and representatives of Needham agreed to present this proposal to the Pemstar board of directors. On August 11, 2006, Benchmark confirmed Ms. Delly’s verbal proposal in a letter to Pemstar.

On August 15th, 18th and 22nd, the pricing committee of the Pemstar board of directors discussed Benchmark’s proposal and reviewed discussions held at the August 9th meeting. After being advised by legal counsel of their fiduciary duties under applicable law, the Pemstar board of directors authorized Pemstar management to accept an exchange ratio between 0.160 and 0.170, and recommended that the parties negotiate a definitive agreement and complete due diligence within a 60-day exclusivity period. On August 22, 2006, Pemstar proposed in a letter to Benchmark to move forward with due diligence and the negotiation of a definitive agreement if there was agreement to potentially adjust upwards the exchange ratio to as much as 0.170 per share depending on the fluctuations in the relative stock prices of the companies prior to entering into a definitive agreement.

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On September 27, 2006, Pemstar engaged Piper Jaffray & Co. to provide an opinion in connection with the possible business combination transaction with Benchmark.

Over the next several weeks, representatives of Benchmark and Pemstar met at various locations including Rochester, Minnesota, and Tianjin, China, in order to continue due diligence activities. During this time, and in particular on September 22 and 26, and October 5, 2006, the Pemstar board of directors met with Needham, and at times with Piper Jaffray and representatives of Dorsey & Whitney LLP, Pemstar’s legal advisors on the transaction, to discuss the Benchmark proposal and the terms of the draft merger agreement between the parties. Also, between October 1 and October 16, 2006, Mr. Berning, Mr. Lea, Mr. Fu and Ms. Delly, and the legal and financial advisors to Pemstar as well as Benchmark’s legal advisors, Cravath, Swaine & Moore LLP, and its financial advisors, continued negotiations on the proposed transaction and the merger agreement.

On October 11, 2006, Mr. Fu, Ms. Delly, Mr. Berning, Mr. Lea, Mr. Bauer and a representative of Needham met in Dallas, Texas. The management teams discussed details of integration planning related to the merger. Needham presented updated financial information relevant to setting an exchange ratio for the transaction. The two parties then negotiated an exchange ratio of 0.160 of a share of Benchmark common stock for each share of Pemstar common stock and agreed to present this exchange ratio to their respective boards of directors for approval.

On October 16, 2006, the Pemstar board of directors held a special meeting and formed the Special Committee. Prior to the meeting, the directors were provided with the draft merger agreement between Benchmark and Pemstar, a Needham presentation on the merger, a fairness opinion presentation by Piper Jaffray, and other materials relevant to the proposed combination. At the meeting, among other things:

·       executive management of Pemstar described the events that had occurred since the most recent board of directors meeting;

·       executive management of Pemstar described the strategic rationale for the merger, including a review of Pemstar’s previous discussions about potential strategic partners, and the advantages and potential risks of a business combination with Benchmark;

·       executive management of Pemstar summarized the history of the negotiations and described the financial terms of the acquisition and the analysis on which those terms were based. They also discussed other principal business terms of the proposed transaction;

·       Needham reviewed the structure of the proposed transaction, the terms of the merger agreement and described the financial terms of the acquisition and the analysis on which those terms were based;

·       legal counsel to Pemstar reviewed legal matters, including the structure of the proposed transaction, terms of the merger agreement and the fiduciary duties the directors had to shareholders under applicable law; and

·       Piper Jaffray opined, as of October 16, 2006, and based upon and subject to the assumptions made, matters considered and limits of the review undertaken by it, that the consideration to be received by the common stockholders of Pemstar was fair to the common stockholders (other than Benchmark and its affiliates) from a financial point of view and provided the Pemstar board of directors with the analyses underlying its opinion and provided the Pemstar board of directors with a written opinion to that effect.

Following the discussion, the Pemstar board of directors and Special Committee determined that the merger was fair to and in the best interest of the Pemstar shareholders and unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and resolved to recommend that Pemstar’s common stockholders vote in favor of the approval of the merger agreement.

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On October 17, 2006, Benchmark and Pemstar issued press releases announcing the execution of the merger agreement.

Reasons for the Merger and Recommendation of the Pemstar Board of Directors

In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and to unanimously recommend that Pemstar shareholders adopt the merger agreement, each of the Pemstar board of directors and the Special Committee considered the information provided to it, analyzed the terms of the merger agreement, considered a variety of factors, a number of which are summarized below, consulted with members of Pemstar’s executive management and its financial and other advisors regarding the strategic and operational aspects of the merger and the results of the due diligence efforts undertaken by Pemstar and consulted with Pemstar’s legal advisors regarding the duties of the members of the Pemstar board of directors and the terms of the merger agreement. The Pemstar board of directors and Special Committee also considered that Pemstar’s directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of the Pemstar’s shareholders generally, as described under “Interests of Pemstar Directors and Executive Officers in the Merger.” Potential benefits to Pemstar and its shareholders, employees, partners and customers identified by the Pemstar board of directors and Special Committee include the following:

·       the opportunity for Pemstar shareholders to receive a premium for their shares based upon the market prices of Pemstar common stock and Benchmark common stock immediately prior to the public announcement of the merger. Specifically, the exchange ratio in the merger represented a 26.8% premium over the closing price for Pemstar common stock on October 16, 2006, the last trading day before Pemstar and Benchmark announced the merger;

·       the ability of Pemstar shareholders to continue to participate in the growth of the business conducted by Benchmark and Pemstar following the merger and to benefit from the potential future appreciation in value of shares of Benchmark common stock;

·       the enhanced ability of Pemstar to execute its business plan by using the combined resources of Pemstar and Benchmark; and

·       the potential for increased opportunities for Pemstar employees and partners, and the potential for even better solutions for Pemstar current and future customers.

In the course of deliberations, Pemstar’s board of directors and Special Committee also reviewed with Pemstar executive management and its legal and financial advisors a number of additional factors relevant to the merger, including:

·       the terms and conditions of the merger agreement, including the termination fee, the closing conditions and the provisions regarding the compensation and benefits to be provided to Pemstar employees following the merger;

·       the likelihood that the merger will be completed;

·       the intended treatment of the merger as a tax-free reorganization;

·       the opinion of Piper Jaffray to the effect that, as of the date of the merger agreement and subject to the considerations set forth in the opinion, the merger consideration was fair to shareholders of Pemstar (other than Benchmark and its affiliates) from a financial point of view. See “Opinion of Piper Jaffray”;

·       information relating to the business, assets, management, competitive position, operating performance, trading performance and prospects of each of Pemstar and Benchmark, including the prospects of Pemstar if it were to continue as an independent company;

·       then current economic and financial market conditions and historical market prices, volatility and trading information for Pemstar common stock and Benchmark common stock;

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·       the belief, based on presentations by Pemstar’s legal and financial advisors, that the terms and conditions of the merger agreement, including the limited conditions of Benchmark’s obligation to close the merger and the ability of Pemstar to consider proposed alternative business combinations under certain circumstances, are generally customary for transactions such as the merger;

·       the fact that the Pemstar shareholders would hold approximately 10.6% of the outstanding shares of Benchmark common stock following the merger;

·       the experience and strength of Benchmark’s management team;

·       whether strategic alternatives to the merger would enhance long-term shareholder value; and

·       the results of due diligence investigations of Benchmark by management and legal and other advisers.

Pemstar’s board of directors and the Special Committee also considered and balanced against the potential benefits of the merger a number of potentially negative factors, including the following:

·       the risk that the merger would not be consummated and the effect of the public announcement of the merger on Pemstar’s sales and operating results, suppliers, creditors and customers and Pemstar’s ability to attract and retain key management, marketing, technical, sales and other personnel;

·       the possibility that the market value of Benchmark common stock might decrease prior to the closing of the merger, resulting in less aggregate value to the Pemstar shareholders;

·       the fact that shareholders of Pemstar will not receive the full benefit of any future growth in the value of their equity that Pemstar may have achieved as an independent company, and the potential disadvantage to Pemstar shareholders who receive Benchmark common stock in the event that Benchmark does not perform as well in the future as Pemstar may have performed as an independent company;

·       the possibility that some provisions of the merger agreement, including the no-solicitation and termination fee payment provisions, might have the effect of discouraging other persons potentially interested in merging with or acquiring Pemstar from pursuing such an opportunity;

·       the restrictions on the conduct of Pemstar’s business during the period between signing of the merger agreement and the completion of the merger or the termination of the merger agreement, which could delay or prevent Pemstar from pursuing business opportunities that may arise prior to the completion of the merger;

·       the business, financial, operational and other risks associated with the Benchmark common stock that Pemstar stockholders will receive as consideration in the merger; and

·       the other risks described in the section entitled “Risk Factors Relating to the Merger”.

Pemstar’s board of directors and the Special Committee concluded that overall these risks were outweighed by the potential benefits of the merger, and determined that the merger was fair to and in the best interests of the Pemstar shareholders.

The above discussion does not include all of the information and factors considered by Pemstar’s board of directors and the Special Committee. In view of the variety of factors considered in connection with its evaluation of the merger agreement, Pemstar’s board of directors and the Special Committee did not find it practicable to and did not quantify or otherwise assign relative weight to the specific factors considered in reaching its determination. In addition, individual members of Pemstar’s board of directors or the Special Committee may have given different weight to different factors.

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Opinion of Pemstar’s Financial Advisor

Pemstar retained Piper Jaffray to render to the Pemstar board of directors an opinion as to the fairness, from a financial point of view, of the merger consideration.

Piper Jaffray delivered its written opinion dated October 16, 2006 that as of that date and based upon and subject to the assumptions, factors and limitations set forth in the written opinion and described below, the merger consideration of 0.160 of a share of Benchmark common stock for each issued and outstanding share of Pemstar common stock was fair, from a financial point of view, to the holders of Pemstar common stock (other than Benchmark and its affiliates).

A copy of Piper Jaffray’s written opinion is attached to this proxy statement/prospectus as Appendix II and is incorporated into this document by reference.

While Piper Jaffray rendered its opinion and provided certain analyses to the board of directors of Pemstar, Piper Jaffray was not requested to, and did not make, any recommendation to the board of directors as to the specific form or amount of the consideration to be received by Pemstar shareholders in the proposed merger, which was determined through negotiations between Pemstar and Benchmark. Piper Jaffray’s written opinion, which was addressed to the Pemstar board of directors, addressed only the fairness, from a financial point of view, of the proposed consideration to be received by the holders of Pemstar common stock in the proposed merger, and did not address any other terms or agreement relating to the merger, did not address Pemstar’s underlying business decision to proceed with, or effect, the merger or structure thereof, or the relative merits of the merger compared to any alternative business strategy or transaction in which Pemstar might have engaged and does not constitute a recommendation to any Pemstar stockholder as to how to vote with respect to the merger. Piper Jaffray did not act as financial advisor to Pemstar and was not requested to solicit, and did not solicit, any expressions of interest from any other parties with respect to the merger of all or a part of Pemstar, any business combination of Pemstar or any other alternative transaction.

In arriving at its opinion, Piper Jaffray’s review included:

·       financial terms of the draft of the merger agreement dated October 16, 2006;

·       certain publicly available financial, market, securities and other data with respect to Pemstar and Benchmark;

·       due diligence materials prepared by Pemstar management and furnished to Benchmark;

·       certain internal financial projections for Pemstar on a stand alone basis and furnished to Piper Jaffray by the management of Pemstar;

·       discussions with members of the senior management of Pemstar and Benchmark with respect to the business and prospects of Pemstar and Benchmark on a stand alone basis and on a combined basis following the merger;

·       historical prices and trading volumes for certain other companies deemed comparable to Pemstar and Benchmark by Piper Jaffray;

·       financial performance and equity market capitalization of Pemstar and Benchmark with that of certain other publicly traded companies deemed comparable to Pemstar and Benchmark by Piper Jaffray;

·       financial terms, to the extent publicly available, of certain selected merger transactions;

·       discounted cash flow analysis for Pemstar and Benchmark on a stand-alone basis; and

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·       the relative contributions of Pemstar and Benchmark to the combined company and the anticipated effect of the merger on the earnings per share of Benchmark.

The following is a summary of the material analyses and other information that Piper Jaffray prepared and relied on in delivering its opinion to the board of directors of Pemstar. This summary includes information presented in tabular format. In order to understand fully the financial analyses used by Piper Jaffray, these tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Except as otherwise noted, the quantitative information which follows, to the extent it is based on market data, is based on market data as it existed on or before October 13, 2006, and is not necessarily indicative of current market conditions.

Implied Consideration

Giving effect to the exchange ratio of 0.160 of a share of Benchmark common stock for outstanding shares of Pemstar common stock and common stock equivalents, Piper Jaffray calculated the aggregate implied value of the consideration payable in the merger for Pemstar common stock to be approximately $225.9 million, or $4.64 per share. Piper Jaffray also calculated the implied enterprise value (equity value plus debt less cash) of Pemstar to be approximately $298.9 million. Piper Jaffray also calculated that the fully diluted shares to be issued to the stockholders and option holders of Pemstar would be an aggregate of 10.6% of the total Benchmark common stock and common stock equivalents following the merger based on share information furnished by management of Benchmark.

Pemstar Historical Trading Analysis

Piper Jaffray reviewed general trading information concerning Pemstar including the stock price and volume over selected periods, the price performance of Pemstar over the previous 12 months relative to the comparable companies identified below for Pemstar, the S&P 500 and the Nasdaq Global Market and the stock trading history of Pemstar common stock. Piper Jaffray presented the recent common stock trading information for Pemstar contained in the following table:

 

 

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Piper Jaffray also compared the exchange ratio for the merger to the implied average exchange ratio calculated based on historical closing stock prices for Pemstar and Benchmark. Piper Jaffray examined the 5-day, 20-day, 60-day, 180-day and 365-day average exchange ratios for Pemstar and Benchmark, prior to an assumed announcement date of October 16, 2006. The analysis produced the following implied average historical exchange ratios and implied premiums to such implied average historical exchange ratio based on the exchange ratio of 0.160 of a share of Benchmark common stock for each share of Pemstar common stock.

 

Pemstar Selected Public Company Analysis

Piper Jaffray analyzed financial information and valuation ratios of Pemstar compared to corresponding data and ratios from a group of eight publicly traded companies deemed comparable by Piper Jaffray to aspects of Pemstar’s business. This group comprised Benchmark, Celestica Inc., Flextronics International Ltd., Jabil Circuit Inc., Plexus Corp., Sanmina-SCI Corp., Solectron Corp. and Ultra Clean Holdings Inc. This group was selected from publicly traded companies that are engaged in providing electronic manufacturing services and contract manufacturing solutions and have SIC codes of 3672, 3577, 3571 or 3674. Piper Jaffray used publicly available Wall Street research estimates for the selected public company group and management estimates for Pemstar. This analysis produced multiples of selected valuation data which Piper Jaffray compared to multiples for Pemstar derived from the merger consideration.

(1)          Based on value of implied merger consideration of $4.64 per share of Pemstar common stock.

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Pemstar Premiums Paid Analysis

Piper Jaffray reviewed 99 transactions in the broad technology sector. These transactions were selected by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

·       transactions in the technology industry;

·       transactions announced between January 1, 2005 and the present in the technology industry;

·       transactions with a minimum equity value of $50 million;

·       transactions with U.S. publicly traded targets;

·       transactions with publicly available information on terms; and

·       transactions, that were not share repurchases, acquisitions of a minority interest and acquisitions of a division.

In examining the selected transactions, Piper Jaffray analyzed the premium (or discount) payable in the transactions over trading prices for the target company one day, five days and twenty days prior to the announcement of the transaction. Piper Jaffray also analyzed the premium (or discount) of the exchange ratio offered in the selected transactions over the average historical exchange ratio of the companies for five days, twenty days and sixty days prior to the announcement of the transaction. Piper Jaffray calculated implied price premiums for Pemstar based upon the value of the merger consideration of $4.64 per share of Pemstar common stock and an assumed announcement date of October 16, 2006. In addition, Piper Jaffray calculated the average exchange ratio premium for Pemstar in the merger based on the merger exchange ratio of 0.160 of a share of Benchmark common stock for each share of Pemstar common stock and an assumed announcement date of October 16, 2006. The following table sets forth information concerning the stock price and exchange ratio premiums implied by the merger and the stock price and exchange ratio premiums in the selected transactions.

 

Pemstar M&A Transaction Analysis

Piper Jaffray reviewed 10 acquisition transactions involving companies operating in similar businesses and having SIC code classifications similar to Pemstar’s. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

·       transactions with targets in the contract manufacturing sector;

·       transactions that were announced between January 1, 2003 and October 13, 2006;

·       transactions with an offer value between $25 million and $500 million;

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·       transactions with publicly available information on terms; and

·       transactions that were not share repurchases or acquisitions of a minority interest.

Piper Jaffray performed its analysis on the following transactions:

·       Acquisition of Tyco Electronics Printed Circuit Group by TTM Technologies;

·       Acquisition of Sieger Engineering, Inc. by Ultra Clean Holdings Inc.;

·       Acquisition of Celetronix India Private Ltd. by Jabil Circuit Inc.;

·       Acquisition of Parlex Corp. by Johnson Electric Holdings Ltd.;

·       Acquisition of Varian Inc-Electronics Manufacturing Business by Jabil Circuit Inc;

·       Acquisition of SMTEK International Inc by CTS Corp;

·       Acquisition of Agilent-Camera Module Business by Flextronics International Ltd;

·       Acquisition of Pentex-Schweizer Circuits by Sanmina-SCI Corp;

·       Acquisition of Coorstek-Metal Assembly Division by Sanmina-SCI Corp; and

·       Acquisition of Manufacturers Services Ltd by Celestica Inc.

Piper Jaffray analyzed financial information of the targets in these transactions. Piper Jaffray used publicly available Wall Street research estimates for the selected transaction group and management estimates for Pemstar. This analysis produced multiples of selected valuation data which Piper Jaffray compared to multiples for Pemstar derived from the merger consideration. The following table sets forth such comparisons.

 

Pemstar Discounted Cash Flow Analysis

Piper Jaffray performed a discounted cash flow analysis for Pemstar in which it calculated the present value of the projected hypothetical future cash flows of Pemstar using management estimates for the fiscal years ending December 31, 2006 and 2007. While Pemstar management has not previously provided projections for the fiscal years ending December 31, 2008 through 2011, such information necessary for purposes of Piper Jaffray’s discounted cash flow analysis was developed with guidance from Pemstar management for such periods on which Piper Jaffray relied. Piper Jaffray estimated a range of theoretical values for Pemstar based on the net present value of its implied annual cash flows, its net operating losses and a terminal value for Pemstar in 2011 calculated based upon a multiple of EBITDA. For purposes of this analysis, Piper Jaffray used discount rates ranging from 15% to 25% based upon an analysis of the weighted average cost of capital of Pemstar, and terminal values based on multiples of projected 2011 EBITDA ranging from 6.0x to 8.0x. Piper Jaffray’s calculation of the present value of Pemstar’s net operating losses and the utilization of the net operating losses subject to the limitations under Section 382 of the Code was based upon estimates of Pemstar management. The discounted cash flow analysis resulted in implied equity values per share of Pemstar common stock ranging from a low of $2.75 per share to a high of $5.68 per share.

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Contribution Analysis

Piper Jaffray analyzed the respective contributions of Pemstar and Benchmark to revenues, gross profit, EBITDA and net income of the combined company for the latest twelve months, next twelve months and projected calendar years 2006 and 2007. This analysis was based upon the actual results for Pemstar and Benchmark for the latest twelve months as represented in each company’s respective public filings applicable to such period, management estimates for Pemstar for the next twelve months and calendar years 2006 and 2007, and publicly available research estimates and Institutional Brokers’ Estimate System (“IBES”) estimates for Benchmark for the next twelve months and calendar years 2006 and 2007.

In both the actual results and estimates, possible transaction related effects were excluded, including, any possible synergies and transaction related costs and adjustments. Piper Jaffray also computed Pemstar’s implied share of equity of the combined entity as adjusted for the debt and cash positions of Pemstar and Benchmark (as of June 30, 2006), and based on Benchmark’s share price on October 13, 2006. This analysis indicated the following contributions of Pemstar and Benchmark, and Pemstar’s implied share of equity of the combined entity:

 

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Benchmark Historical Trading Analysis

Piper Jaffray reviewed general trading information concerning Benchmark including the stock price and volume over selected periods, the price performance of Benchmark over the previous 12 months relative to the comparable companies identified below for Benchmark, the S&P 500 and the Nasdaq Global Market and the stock trading history of Benchmark common stock. Piper Jaffray presented the recent common stock trading information for Benchmark contained in the following table:

 

Piper Jaffray also analyzed the relative performance of Benchmark to Wall Street estimates for the past twelve quarters. Piper Jaffray observed that Benchmark has exceeded Wall Street revenue estimates by an average of 1.3% over these past twelve quarters, and has exceeded the Wall Street net income estimates by an average of 5.8% over the same period.

Benchmark Selected Public Company Analysis

Piper Jaffray analyzed financial information and valuation ratios of Benchmark compared to corresponding data and ratios from a group of seven publicly traded companies deemed comparable by Piper Jaffray to aspects of Benchmark’s business. This group comprised Celestica Inc., Flextronics International Ltd., Jabil Circuit Inc., Pemstar, Plexus Corp., Sanmina-SCI Corp. and Solectron Corp. This group was selected from publicly traded companies that are engaged in providing electronic manufacturing services and contract manufacturing solutions and have SIC codes of 3672, 3577 or 3571. Piper Jaffray used publicly available Wall Street research estimates for the selected public company group and Benchmark. This analysis produced multiples of selected valuation data which Piper Jaffray compared to multiples for Benchmark derived from Benchmark’s closing price of $28.97 on October 13, 2006.

 

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Benchmark M&A Transaction Analysis

Piper Jaffray reviewed the same 10 acquisition transactions described above under “Pemstar M&A Transaction Analysis”.

Piper Jaffray analyzed financial information of the targets in these transactions. Piper Jaffray used publicly available Wall Street research estimates for the selected transaction group and Benchmark. This analysis produced multiples of selected valuation data which Piper Jaffray compared to multiples for Benchmark derived from the closing price of $28.97 of Benchmark on October 13, 2006. The following table sets forth such comparisons.

 

Benchmark Discounted Cash Flow Analysis

Piper Jaffray performed a discounted cash flow analysis for Benchmark in which it calculated the present value of the projected hypothetical future cash flows of Benchmark using Wall Street estimates for 2006 and 2007 and Piper Jaffray estimates of sales, EBITDA margins, working capital, capital expenditures and taxes for 2008 through 2011, based on Wall Street guidance for the electronic manufacturing services and contract manufacturing solutions sector. Piper Jaffray estimated a range of theoretical values for Benchmark based on the net present value of its implied annual cash flows and a terminal value for Benchmark in 2011 calculated based upon a multiple of EBITDA. For purposes of this analysis, Piper Jaffray used discount rates ranging from 12% to 16% based upon an analysis of the weighted average cost of capital of Benchmark, and terminal values based on multiples of projected 2011 EBITDA ranging from 6.0x to 10.0x. This analysis resulted in implied equity values per share of Benchmark ranging from a low of $19.68 per share to a high of $30.34 per share.

Accretion/Dilution Analyses

Piper Jaffray analyzed pro forma effects resulting from the impact of the transaction on the projected earnings per share of the combined company for calendar year 2007 based on management estimates for Pemstar and Wall Street research estimates for Benchmark. Without taking possible synergies that management estimates the combined company may realize following the consummation of the merger or any transaction related expenses, Piper Jaffray determined that the merger could be accretive for calendar year 2007 to the projected stand-alone earnings per share of Benchmark.

In reaching its conclusion as to the fairness of the merger consideration and in its presentation to the board of directors, Piper Jaffray did not rely on any single analysis or factor described above, assign relative weights to the analyses or factors considered by it, or make any conclusion as to how the results of any given analysis, taken alone, supported its opinion. The preparation of a fairness opinion is a complex process and not necessarily susceptible to partial analysis or summary description. Piper Jaffray believes that its analyses must be considered as a whole and that selection of portions of its analyses and of the factors considered by it, without considering all of the factors and analyses, would create a misleading view of the processes underlying the opinion.

The analyses of Piper Jaffray are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by the analyses. Analyses relating to the value of

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companies do not purport to be appraisals or valuations or necessarily reflect the price at which companies may actually be sold. No company or transaction used in any analysis for purposes of comparison is identical to Pemstar, Benchmark or the merger. Accordingly, an analysis of the results of the comparisons is not mathematical; rather, it involves complex considerations and judgments about differences in the companies to which Pemstar and Benchmark were compared and other factors that could affect the public trading value of the companies.

For purposes of its opinion, Piper Jaffray relied upon and assumed the accuracy and completeness of the financial, legal, accounting and other information discussed with or reviewed by it, and did not assume responsibility independently to verify such information. Piper Jaffray assumed, with Pemstar’s consent, that the information provided to Piper Jaffray was prepared on a reasonable basis in accordance with industry practice, and that Pemstar’s and Benchmark’s management is not aware of any information or facts that would make the information provided to it incomplete or misleading. In rendering its opinion, Piper Jaffray assumed that Pemstar and Benchmark are not party to any material pending transaction, including any external financing, recapitalization, acquisition or merger, divestiture or spin-off other than the merger, and with respect to financial forecasts, pro forma and other forward looking data relating to Pemstar and Benchmark reviewed by Piper Jaffray, Piper Jaffray assumed that such information reflects the best currently available estimates and judgments of Pemstar’s management. Piper Jaffray expressed no opinion as to any financial forecasts, pro forma data or other forward looking financial information of Pemstar or Benchmark or the assumptions on which they were based. Without limiting the generality of the foregoing, the financial forecasts furnished by Pemstar management on which Piper Jaffray relied excluded the benefits of any Pemstar’s China (Tianjin) operations. Piper Jaffray also relied on the assumptions of Pemstar’s management, as to all accounting, legal, tax and financial reporting matters with respect to Pemstar and the merger agreement.

In rendering its opinion, Piper Jaffray also assumed the merger will be consummated pursuant to the terms of the merger agreement without amendments thereto, without adjustments to the merger consideration and without waiver by any party of any conditions or obligations thereunder. In arriving at its opinion, Piper Jaffray assumed that all the necessary regulatory approvals and consents required for the transaction will be obtained in a manner that will not adversely affect Pemstar or Benchmark or alter the terms of the merger.

In arriving at its opinion, Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of Pemstar or Benchmark, or concerning the solvency or fair value of either entity, and was not furnished with any such appraisals or valuations. The analyses performed by Piper Jaffray in connection with its opinion were going concern analyses and Piper Jaffray did not express any opinion regarding the liquidation value of any entity.

The opinion was based on information available to Piper Jaffray and the facts and circumstances as they existed and were subject to evaluation on the date of the opinion. Events occurring after that date could materially affect the assumptions used in preparing the opinion. Piper Jaffray did not express any opinion as to the price at which shares of common stock of Pemstar or Benchmark have traded or such stock may trade following announcement of the merger. Piper Jaffray did not undertake to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of its opinion and does not have any obligation to update, revise or reaffirm its opinion.

Other Matters Regarding Piper Jaffray

Piper Jaffray, as a customary part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings and secondary distributions of securities, private placements and valuations for estate, corporate and other purposes. The Board of Directors of Pemstar selected Piper Jaffray to render its opinion because of Piper Jaffray’s

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experience and expertise in the electronic manufacturing services and contract manufacturing solutions sector. In the ordinary course of its business, Piper Jaffray and its affiliates may actively trade securities of Pemstar and Benchmark for its own account or the account if its customers and, accordingly, it may at any time hold a long or short position in such securities. Piper Jaffray makes a market in Pemstar common stock and Benchmark common stock.

Under the terms of the engagement letter between Pemstar and Piper Jaffray, Pemstar has agreed to pay Piper Jaffray a fee of $400,000 for providing its opinion as to the fairness of the merger consideration. Piper Jaffray has been previously engaged by Pemstar to provide investment banking services for a fee and Piper Jaffray may seek to be engaged by Pemstar, the combined company or the combined company’s affiliates in the future. Whether or not the transaction is consummated, Pemstar has agreed to pay the reasonable out-of-pocket expenses of Piper Jaffray and to indemnify Piper Jaffray against liabilities incurred. These liabilities include liabilities under the federal securities laws in connection with the engagement of Piper Jaffray by Pemstar’s board of directors.

Interests of Pemstar Directors and Executive Officers in the Merger

In considering the recommendation of the Pemstar board of directors and the Special Committee with respect to the merger agreement and the merger, you should be aware that Pemstar’s directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of the Pemstar shareholders generally. The Pemstar board of directors and the Special Committee were aware of these interests and considered them, among other matters, in reaching their decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, price change and to recommend that the Pemstar shareholders vote in favor of adoption of the merger agreement.

For biographical information regarding Pemstar’s directors and executive officers, information concerning the compensation paid to the chief executive officer and the other four most highly compensated executive officers of Pemstar for the fiscal year ended March 31, 2006, as well as any information regarding relationships and related transactions involving Pemstar’s directors and executive officers for the fiscal year ended March 31, 2006, see Pemstar’s proxy statement used in connection with its 2006 annual meeting of shareholders, which is incorporated by reference into this proxy statement/prospectus.

Stock Options

The vesting of each option to acquire Pemstar common stock held by employees, including executive officers, and non-employee directors of Pemstar will be accelerated as a result of the transaction.

Each stock option held by a Pemstar employee immediately prior to the effective time of the merger will be converted into an option to acquire, on the same terms and conditions as were applicable under such Pemstar stock option (taking into account the acceleration of vesting occurring as a result of the transaction), the number of shares of Benchmark common stock determined by multiplying the number of shares of Pemstar common stock subject to such Pemstar option immediately prior to the effective time of the merger by the exchange ratio in the merger, at an exercise price per share equal to the per share exercise price of the Pemstar stock option divided by the exchange ratio in the merger. The number of shares will be rounded down to the nearest whole share, the exercise price will be rounded up to the nearest whole cent, and any options intended to qualify as ISOs will be adjusted in a manner that intends to preserve their qualification as ISOs.

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