Semiconductor maker Semtech Corp. (SMTC) has agreed to acquire Canada-based peer Gennum Corp. (GND.TO) for about C$500 million, or $494 million, the two companies said Monday. Semtech noted that the deal will significantly expand as well as diversify its analog and mixed-signal portfolio.
Under the terms of the deal that will be completed through a plan of arrangement, Gennum shareholders will receive C$13.55 in cash for each common share of Gennum held by them. The offer price represents a premium of 120 percent to Gennum's closing stock price of C$6.15 on the Toronto stock exchange on Friday.
Semtech estimates the acquisition to result in at least $15 million in annual synergies, which it expects to achieve in full in its fiscal year 2014. Semtech also expects that the acquisition will be accretive to its adjusted earnings per share by more than 20 cents in fiscal year 2013 and more than 40 cents in fiscal year 2014.
Gennum designs and sells products that enable video, data and multimedia content to be transmitted at high speed over long distances, while maintaining signal integrity and eliminating the potential for errors in transmission. Its products are used in broadcast, networking, storage, telecommunications and consumer connectivity equipment.
Gennum is headquartered in Burlington, Ontario, and has about 450 employees, including more than 240 engineers.
Mohan Maheswaran, President and Chief Executive Officer of Semtech Corp. said, "We believe Gennum's unique signal integrity solutions and highly differentiated 1 Gbps to 25 Gbps optical products combined with Semtech's leading 40 Gbps and 100 Gbps SerDes portfolio will deliver one of the industry's most complete and robust portfolios to the communications infrastructure, data communications and enterprise computing segments."
Maheswaran also noted that Gennum's strong position in video broadcast and the emerging HD video surveillance market will broaden and further diversify Semtech's portfolio of analog semiconductors targeted at fast growing markets.
Semtech expects to finance the acquisition through a combination of cash on hand and new bank financing. The company has received a financing commitment of up to $400 million from Jefferies Finance LLC. The proposed transaction is not subject to a financing condition.
Gennum said that the transaction has been reviewed by a special committee of its board of directors and been unanimously approved by the board. The transaction requires the approval of at least 66.6 percent of votes that will be cast by Gennum shareholders at a special meeting expected to be held in mid-March 2012. However, the transaction does not require approval by Semtech shareholders.
The arrangement agreement contains a termination fee of C$19.35 million payable by Gennum in certain circumstances. Semtech has also been granted a right to match competing proposals. Gennum expects to declare its regular quarterly dividend, prior to the closing date, subject to the discretion of the board of directors of Gennum and legal requirements.
SMTC closed Monday's trading at $26.89, down $0.18 or 0.66 percent on a volume of 216,531 shares.
GND.TO closed Friday's trading at $6.15 on a volume of 7,300 shares.
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