Key Takeaways
- • Penguin Solutions (Nasdaq: PENG) has agreed to sell Cree LED to Transom Capital Group, a Los Angeles private equity firm focused on middle-market operating turnarounds, in an all-cash deal expected to close in Q1 2027; neither side disclosed a price.
- • Cree LED's segment revenue has held in a narrow band of roughly $11 million over four fiscal years, from $248.3 million in fiscal 2023 to $248.7 million in fiscal 2026, while Penguin's total sales grew from $1.17 billion to $1.73 billion over fiscal 2024-2026 on memory growth.
- • LED's share of Penguin's revenue fell from 22.2% to 14.4% between fiscal 2024 and 2026, and the business no longer appears in the company's boilerplate description.
- • SMART Global acquired the business in 2021 for up to $300 million ($50 million cash, a $125 million seller note and up to $125 million in earn-outs), making the undisclosed Transom price the key unknown for valuing the asset.
- • Penguin projects Cree LED at about 10% of fiscal 2027 net sales, roughly $240 million at the midpoint of its $2.43 billion guidance, implying no growth; the carve-out will require Transom to rebuild finance, IT and administrative functions.
Summary
Penguin Solutions has agreed to sell Cree LED, the LED components business that originated as the core of Cree Inc., to Transom Capital Group in an all-cash transaction expected to close in the first calendar quarter of 2027. Neither party disclosed the purchase price. Cree LED makes XLamp chips and components that are sold to luminaire manufacturers rather than fixture makers, and is distinct from Cree Lighting, which Cree sold to IDEAL Industries in 2019.
The business has changed hands several times. Cree sold LED to SMART Global Holdings in a deal completed March 1, 2021, valued at up to $300 million, including $50 million in cash, a $125 million seller note and up to $125 million in earn-outs. Cree Inc. later renamed itself Wolfspeed in October 2021 to focus on silicon carbide, and SMART Global became Penguin Solutions in October 2024.
Penguin's filings show the LED segment has been essentially flat. Segment revenue was $248.3 million in fiscal 2023, $259.8 million in fiscal 2024, $256.1 million in fiscal 2025 and $248.7 million in fiscal 2026. Over the same period, Penguin's total sales rose from $1.17 billion to $1.73 billion, driven largely by memory revenue, which increased from $356.4 million to $924.0 million. LED's share of company revenue fell from 22.2% to 14.4%. Fourth-quarter fiscal 2026 LED revenue reached $71.9 million, up 6.6% year over year, though the first nine months of the year ran about 6.3% behind the prior year.
Transom, founded in 2008, focuses on corporate carve-outs and complex situations and has an in-house operations team. Its current portfolio includes Bose Professional, SigmaTron International, Binswanger Glass and Cross, none of which are LED or semiconductor companies. Transom Managing Director Conor Davenport praised Cree LED's reputation for quality and customer relationships and said the firm aims to position it "for long-term success as a standalone company." The firm has not described how its "operationally intensive" approach will affect Cree LED's cost structure, research budget or product roadmap.
Penguin said Cree LED represents about 10% of projected fiscal 2027 net sales, implying roughly $240 million against a $2.43 billion midpoint. For fixture makers that design XLamp and other Cree LED parts into specified products, the separation raises questions about pricing, lead times and product continuity, as carve-outs typically require the business to rebuild back-office functions previously provided by its former parent.
The business has changed hands several times. Cree sold LED to SMART Global Holdings in a deal completed March 1, 2021, valued at up to $300 million, including $50 million in cash, a $125 million seller note and up to $125 million in earn-outs. Cree Inc. later renamed itself Wolfspeed in October 2021 to focus on silicon carbide, and SMART Global became Penguin Solutions in October 2024.
Penguin's filings show the LED segment has been essentially flat. Segment revenue was $248.3 million in fiscal 2023, $259.8 million in fiscal 2024, $256.1 million in fiscal 2025 and $248.7 million in fiscal 2026. Over the same period, Penguin's total sales rose from $1.17 billion to $1.73 billion, driven largely by memory revenue, which increased from $356.4 million to $924.0 million. LED's share of company revenue fell from 22.2% to 14.4%. Fourth-quarter fiscal 2026 LED revenue reached $71.9 million, up 6.6% year over year, though the first nine months of the year ran about 6.3% behind the prior year.
Transom, founded in 2008, focuses on corporate carve-outs and complex situations and has an in-house operations team. Its current portfolio includes Bose Professional, SigmaTron International, Binswanger Glass and Cross, none of which are LED or semiconductor companies. Transom Managing Director Conor Davenport praised Cree LED's reputation for quality and customer relationships and said the firm aims to position it "for long-term success as a standalone company." The firm has not described how its "operationally intensive" approach will affect Cree LED's cost structure, research budget or product roadmap.
Penguin said Cree LED represents about 10% of projected fiscal 2027 net sales, implying roughly $240 million against a $2.43 billion midpoint. For fixture makers that design XLamp and other Cree LED parts into specified products, the separation raises questions about pricing, lead times and product continuity, as carve-outs typically require the business to rebuild back-office functions previously provided by its former parent.
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