Christmas came a few days early for AST Research Inc. as the troubled company got $300 million in financial support from Samsung Electronics, triple the size of the package the companies had agreed upon in preliminary negotiations last month.
As part of the deal, Samsung will provide AST with a bank credit guarantee of as much as $200 million for two years, as well as an additional $100 million to cover AST's purchases of computer components from Samsung.
In return, AST will grant Samsung a five-year option to purchase as many as 4.4 million shares of AST common stock for 1 cent per share. If Samsung were to exercise all those options, its stake in AST would grow to 45% from 40%, company officials said.
Samsung, which rescued a failing AST with a $376-million cash infusion last year, will also get to appoint a sixth AST board member, giving it control of the 11-member board.
Ian Diery, a former Apple Computer executive who was hired as chief executive of AST last month, said the package gives a huge boost to AST's turnaround efforts.
"It gives me room," Diery said. "Now I don't have to continue to look over my shoulder for where the next amount of cash is going to come from."
The new package is a far better deal for AST than one the companies first agreed on last month. The original agreement called for Samsung to provide $100 million in credit for one year, and for Samsung's stake in AST to rise to 49%.
Diery said the Korean electronics giant agreed to be more generous after he convinced Samsung officials that AST would need more cash for its turnaround plan to work. Samsung agreed to take a smaller stake in return because officials have grown more confident that Diery's plan will succeed.
"They believed it was a fair deal when they looked at what the potential was," Diery said.
AST, based in Irvine, has lost about $196 million over the past five quarters, and its share of the computer market has been eroded by product delays and other troubles.