Flex sells $2 billion of Axiom convertible preferred at a $37.5 billion valuation ahead of the 2027 spin-off

Flex agreed on Monday, October 5, 2026 to sell $2.0 billion of convertible preferred stock in Axiom Solutions International, the cloud and power infrastructure business it plans to spin off, to funds led by General Catalyst with Koch Equity Development, at an initial enterprise value for Axiom of $37.5 billion. Flex shares were up 2.19% at $119.16 at 10:18 a.m. ET.

The investors are purchasing 200,000 preferred shares at $10,000 each under an agreement signed on Friday, October 2. Flex will use the money mainly for its pending $4.4 billion purchase of EPC Power, a maker of power conversion equipment for AI data centers and the grid, and it plans to separate Axiom into its own listed company in the first quarter of calendar 2027.

The terms of the Axiom preferred

What the investors are paid to wait for

Until the spin-off, the preferred pays 10.0% a year in cash, about $200 million a year on the full $2.0 billion. After separation the rate drops to 6.0% in cash, about $120 million, or 7.0% if Axiom pays in additional shares. The lower rate after separation gives Flex a cost reason to finish the spin-off, and the redemption clause in the 8-K covers the case where it does not happen. If Axiom is still part of Flex on December 31, 2027, Axiom is obliged to redeem the preferred at 115% of its stated value in cash, or 125% if it pays in Flex ordinary shares, with Flex guaranteeing the payment. Cash dividends already received are deducted, the price is grossed up so that investors keep the full premium after an assumed 25.5% tax rate, and any amount left unpaid accrues interest at 12% a year.

For Flex shareholders the clause puts a price on delay. Because the redemption price is reduced by the cash dividends already paid, the investors' total receipts if the separation misses the deadline come to 115% of the $2.0 billion they put in, or $2.3 billion, when paid in cash, or 125%, or $2.5 billion, when paid in Flex shares, before the tax gross-up, and Flex would be paying it while still owning Axiom.

How the money ties to EPC Power

Flex agreed on September 3, 2026 to buy EPC Power for $4.4 billion, subject to adjustments, and expects to close in the fourth quarter of 2026, when EPC will join the cloud and power infrastructure segment that becomes Axiom. Flex expects EPC to bring in about $800 million of revenue in calendar 2026 and to grow about 40% organically in 2027, with an EBITDA margin of about 30% that year. The $2.0 billion of preferred covers a little under half of the EPC price, and Flex has a committed term loan for the rest.

The separation itself is moving through its filings: Axiom filed its Form 10 registration statement with the SEC on September 15, 2026, and Flex shareholders will vote on the spin-off through a proxy statement. Revathi Advaithi, Flex's chief executive, is expected to run Axiom.

Flex closed Friday at $116.61. The release crossed at 8:00:05 a.m. ET, and a MoveSurge reaction reading measured Flex up 1.22% one minute later and 1.21% after ten minutes from a $116.10 reference trade in premarket dealing.