Penguin Solutions Sells Cree LED in All-Cash Deal for Q1 2027 Close

By Daniel Okafor

Penguin Solutions has agreed to sell Cree LED to Transom Capital Group in an all-cash transaction that Penguin expects to close in the first calendar quarter of 2027. The definitive agreement remains subject to customary closing conditions.

Under the definitive agreement, Transom will own Cree LED as a standalone business, while Penguin will redirect resources toward AI data center infrastructure, advanced memory and computing systems.

Kash Shaikh, president and CEO of Penguin Solutions, said:

“Today’s announcement marks another milestone in Penguin Solutions’ transformation into a pure-play, data center-focused company at the intersection of AI infrastructure and memory.

Since launching our AI Factory Platform earlier this year, we have accelerated our financial performance, delivering 58% year-over-year net sales growth in the second half of fiscal 2026, with earnings growing substantially faster than revenue, and provided a strong fiscal 2027 growth outlook.”

Shaikh also said:

“The Cree LED divestiture further demonstrates our disciplined execution, allowing us to concentrate on the significant growth opportunities we see in AI data centers. We believe it positions us for sustained profitable growth. We’re proud of the Cree LED team and believe Transom is well positioned to support its continued innovation and success.”

What changes for Penguin after the sale?

Penguin Solutions said the divestiture will simplify its portfolio and reduce exposure to LED components. Management expects the transaction to improve capital allocation toward AI infrastructure and memory technologies.

By removing an established components business and placing it under private-equity ownership, the divestiture gives Penguin a cleaner portfolio and a more concentrated operating base for data center systems, advanced memory and computing infrastructure.

The company also intends to keep investing in its AI Factory Platform as customers expand computing capacity. The agreement gives Cree LED dedicated ownership, while Transom plans to supply operational resources and strategic support.

What does Cree LED bring to Transom?

Cree LED develops LED chips and components used across lighting, displays and specialized applications. The business has more than 35 years of experience in LED technology and an established intellectual property portfolio.

Its products support:

• High-power and mid-power general lighting;
• Portable lighting;
• Horticulture;
• Specialty lighting; and
• Video screens.

Cree LED has developed relationships with customers that require specialized LED technologies and consistent product performance. Transom believes that this combination of established products, specialized technical capabilities and longstanding customer relationships provides a foundation for continued expansion as an independent business under its ownership.

The agreement calls for Cree LED to operate as an independent business after closing. Transom plans to provide operational resources and strategic support for further growth.

Transom specializes in investments involving corporate divestitures and operationally complex businesses. The Los Angeles-based firm, founded in 2008, invests in middle-market companies and centers its investment strategy on operational improvements and organizational development within those companies.

Conor Davenport, managing director at Transom Capital Group, said:

“Cree LED has an impressive legacy of innovation and an established reputation in the LED industry for high-quality products, reliable performance, and longstanding customer relationships worldwide.

We see significant opportunity to build on this foundation, leveraging our operational expertise and resources to position Cree LED for long-term success as a standalone company. We look forward to partnering with the Cree LED team as the business enters this next chapter.”

How will the sale sharpen Penguin’s AI strategy?

Penguin is developing a Full-Stack AI Factory Platform that combines computing systems, advanced memory, software and engineering services, while its broader offerings include data center computing systems, memory technologies and infrastructure software. Its services are designed to manage complex AI deployments.

Penguin says its customers include:

• Enterprises;
• Sovereign AI initiatives; and
• Neocloud infrastructure providers.

Penguin says those organizations require specialized systems to develop, deploy and operate AI workloads. The company sees significant opportunities in rising demand for AI data center infrastructure.

Penguin’s strategy is to provide the infrastructure those requirements demand, including computing environments for AI model training, inference and other advanced workloads. The company intends to continue investing in the platform as customers expand their computing capabilities.

Management believes the divestiture gives Penguin more capital flexibility and positions its narrower portfolio for sustained profitable growth.

What happens to fiscal 2027 guidance?

Penguin reported that net sales increased 58% year over year during the second half of fiscal 2026. Management said earnings grew at a faster rate than revenue during the same period. The company also said its expectations for AI infrastructure and memory demand remain unchanged.

Penguin’s reaffirmed fiscal 2027 financial outlook includes a full year of projected contributions from Cree LED, representing approximately 10% of the company’s expected net sales. On that outlook, Cree LED represents about $1 of every $10 in expected net sales.

Penguin expects to update its financial guidance after the transaction closes to reflect the sale and its financial effects. The current outlook therefore retains the projected Cree LED contribution until the company publishes its revision.

Who is advising the transaction?

According to the companies, Lazard serves as financial adviser to Penguin Solutions, while Latham & Watkins provides legal counsel to Penguin and Kirkland & Ellis serves as legal adviser to Transom Capital Group.

The planned sale gives Cree LED dedicated ownership and operational resources while allowing Penguin to accelerate its transformation toward AI infrastructure and memory technologies.

The next concrete checkpoint is Penguin’s revised fiscal 2027 guidance after the transaction closes in the first calendar quarter of 2027. It will show how the roughly 10% sales contribution changes and whether the more concentrated portfolio supports management’s promised path to sustained profitable growth.