Semtech Corp. (NASDAQ: SMTC) says it will buy fellow analog and mixed-signal semiconductor developer Gennum Corp. (TSX:GND) for approximately CDN$500 million (approximately US$494 million). Gennum’s products and expertise in devices for optical communications and video broadcast will both strengthen and extend Semtech’s existing line of silicon for the metro, access, and enterprise computing markets, the buyer asserts.
Gennum was founded in 1973 and is headquartered in Burlington, Ontario, Canada. Gennum has approximately 450 employees, including more than 240 engineers, and has offices in Canada, Germany, India, Japan, Mexico, Taiwan, the United Kingdom, and the United States. Its devices are used in broadcast, networking, storage, telecommunications, and consumer connectivity equipment.
The company has produced devices for a wide range of optical network applications, including Fibre Channel ( see “Gennum addresses 16GFC with SFP+ IC product”) and 10G EPON (see “OFC/NFOEC 2010 Reporter's Notebook, Day 3”). It also has dabbled in optical modules (see “Gennum debuts 3-Gbps video optical modules”).
"We are very excited with the acquisition of Gennum Corporation," stated Mohan Maheswaran, Semtech’s president and CEO. "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. Additionally, Gennum's strong position in video broadcast and the emerging HD video surveillance market broadens and further diversifies Semtech's portfolio of high-performance 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 US$400 million from Jefferies Finance LLC. The proposed transaction is not subject to a financing condition.
Semtech estimates that the acquisition will result in at least $15 million in annual synergies, which Semtech expects will be achieved in full in Semtech's fiscal year 2014. Semtech's management expects that the acquisition will be accretive to non-GAAP earnings per share by more than 20 cents in fiscal year 2013 and more than 40 cents in fiscal year 2014.
The transaction has been reviewed by a Special Committee of the Board of Directors of Gennum and has been unanimously approved by Gennum’s board. The agreement calls for Semtech to pay a CDN$19.35 million termination fee under certain circumstances if the deal falls through. Semtech also has the right to match competing offers.
The transaction still requires the approval of at least 66.67% of votes cast by Gennum shareholders at a special meeting of shareholders, expected to be held in mid-March 2012. The acquisition also is subject to the satisfaction of certain other closing conditions, including the approval of the Ontario Superior Court of Justice. The transaction is not subject to the receipt of any regulatory approvals.