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19 August 2014

GigOptix proposes to acquire memory product firm GSI for $161m

GigOptix Inc of San Jose, CA, USA (a fabless supplier of analog semiconductor and optical communications components for fiber-optic and wireless networks) is proposing to acquire GSI Technology Inc of Sunnyvale, CA for $6.50 per share. This consists of (i) $2.00 per share in cash, (ii) GigOptix common stock worth $1.33 (based on the volume-weighted average price of GigOptix’s common stock for the three trading days ending one day prior to the closing of the merger) and (iii) a special dividend of $3.17 per share in cash payable by GSI. The offer represents a 32% premium above the closing price of $4.94 per share for GSI’s common stock on 18 August, and a 12% premium above the closing price of $5.80 on 8 July.

The latter date was the day before GSI commenced a modified Dutch auction self-tender offer, after which GSI accepted for purchase about 3.85 million shares (14% of the outstanding common stock) at $6.50 per share, on par with GigOptix’s offer price). About 10.5 million shares were tendered, representing in excess of 38% of the shares outstanding prior to the commencement of the Dutch auction.

On a preliminary basis and subject to confirmatory due-diligence, GigOptix believes that the combined firm (which would have generated about $86m in sales based on reported revenues over the most recent trailing 12 months for each company) would be immediately accretive on an adjusted EBITDA basis.

GigOptix says that, by offering both GSI’s high-performance memory products for networking and telecoms equipment and GigOptix’s high-speed communications components, the firms would enhance their collective product and service offerings, providing a wider range of companion and complementary products and more effectively challenging their respective competitors.

GigOptix is a fabless supplier of high-speed semiconductor components that enable end-to-end information streaming over optical and wireless networks. Products address long-haul and metro telecom applications as well as emerging high-growth opportunities for Cloud and data-center connectivity, storage-farms connectivity, interactive applications for consumer electronics, high-speed optical and wireless networks, and the industrial, defense and avionics industries. The firm claims that its business is unique as it consists of both RF and ASIC technologies products serving the high-speed telecom, datacom, storage and consumers optical and wireless communication markets, as well as the military/aerospace, testing and medical industrial markets.

Through our high-speed communication products we offer a broad portfolio of high-performance optical and wireless components to telecom and datacom customers, including (i) mixed-signal radio-frequency integrated circuits (RFIC), including 10-400Gbps laser and optical drivers and trans-impedance amplifiers (TIA) for telecom, datacom, and consumer electronic fiber-optic applications; (ii) power amplifiers and transceivers for microwave and millimeter-wave monolithic microwave integrated circuit (MMIC) wireless applications including 50-60GHz, 71-76Ghz and 81-83Ghz power amplifiers and transceiver chips; and (iii) integrated systems in a package (SIP) solutions for both fiber-optic and wireless applications. This product line also partners with key customers on development projects that generate engineering project revenue and help to position the firm for future product revenues with these key customers.

Through GigOptix’s industrial products, it offers digital and mixed-signal application-specific integrated circuit (ASIC) solutions for industrial, military, avionics, medical and communications markets. The Industrial product line partners with ASIC customers on development projects that generate engineering project revenue and that lead to future product revenues with these ASIC customers.

GigOptix designs, develops and sells analog ICs, multi-chip modules (MCMs), and digital and mixed-signal ASICs, as well as wireless communications MMICs and modules, focusing on the fast-growing market for electronic solutions that enable high-bandwidth optical connections found in telecom, datacom and storage systems, as well as in consumer electronics and computing systems.

Since the firm’s inception in 2007, it has expanded its base through the acquisition and integration of six businesses with complementary products and customers. Specifically, it has expanded its product line from a few 10Gbps ultra-long-haul optical drivers to include: drivers, receivers and TIAs for 10-400Gbps optical applications; power amplifiers for RF applications including wireless and GNSS; and custom ASICs spanning 40nm to 0.6um technology nodes. Also, in February the firm formed the silicon photonics-focused joint venture BrPhotonics Produtos Optoeletrônicos LTDA (BrP) in Campinas, Brazil, taking 49%:51% ownership with Fundação CPqD – Centro De Pesquisa e Desenvolvimento em Telecomunicações (the largest optical Brazilian Federal R&D institute focused on innovation in information and communication technologies).

GigOptix believes that there would be significant synergies in a combined company, providing a diverse product portfolio integrated approach to the firms’ respective major customers, including Alcatel-Lucent, Cisco Systems and Huawei Technologies.

“Together, we can create a world-class high-speed communication semiconductor business,” says GigOptix’s co-founder, chairman & CEO Dr Avi Katz. “Our combination will deliver superior value to our respective shareholders, as it will strengthen the value proposition that we provide to our mutual customers, becoming a major lead supplier of semiconductor devices for the new era of high-speed core, metro and cloud connectivity infrastructure markets,” he believes.

GigOptix believes that the proposed combination would receive all necessary regulatory approvals and expects that the proposed transaction would be completed in fourth-quarter 2014. Upon consummation of the proposed transaction, GSI shareholders and vested option holders would own about 45% of the combined company.

GigOptix has received a commitment letter from Opus Bank to fully debt finance the cash portion of the offer. A copy of the letter has been provided to GSI’s management and board of directors.

GigOptix’s proposal is subject to the negotiation of a definitive merger agreement, and receipt of necessary board, stockholder and regulatory approvals, as well as completion of a due diligence review of GSI. GigOptix would also require the approval of its stockholders to increase its available common stock and approve the issuance of shares in connection with the transaction.

Crowell & Moring LLP is acting as legal counsel to GigOptix and Opus Bank is acting as financial advisor.

Tags: GigOptix

Visit: www.gigoptix.com

Visit: www.gsitechnology.com

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