Flex (NASDAQ: FLEX) has entered into an agreement to sell $2.0 billion of Series A Convertible Preferred Stock in Axiom Solutions International, Inc., its Cloud and Power Infrastructure segment, to funds affiliated with General Catalyst, Koch Equity Development, and co-investors, according to a company statement.

The investment values Axiom at an initial enterprise value of $37.5 billion. Flex said it intends to separate Axiom into an independent, publicly traded company in the first quarter of calendar 2027, subject to customary conditions.

The Convertible Preferred Stock carries a dividend of 10.0% per annum in cash prior to the separation, stepping down to 6.0% per annum in cash, or 7.0% per annum if paid in kind, following the separation.

Net proceeds will be used in part to fund Axiom's pending acquisition of EPC Power, repay any bridge financing related to that acquisition, pay dividends on the preferred stock, and for general corporate purposes. Flex has separately secured committed term loan financing for the remaining balance of the EPC Power acquisition cost.

As part of the deal, General Catalyst will have the right to nominate one director to Axiom's board following the separation.

Revathi Advaithi, Chief Executive Officer of Flex and expected CEO of Axiom, said the investment "provides equity funding for our recently announced acquisition of EPC Power and will allow Axiom to have a strong balance sheet as we prepare to stand up as an independent, publicly traded company."

Hemant Taneja, CEO of General Catalyst, said the firm looks "forward to partnering with Axiom for the long term as it becomes an independent company."

The investment is expected to close following receipt of customary regulatory approvals. PJT Partners is serving as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel to Flex. Davis Polk & Wardwell LLP is serving as legal counsel to General Catalyst.