SAN JOSE, Calif. Genesis Microchip Inc. has announced plans to acquire rival Sage Inc. in an all-stock trade valued at $241 million. The two companies compete in the display controller chip market, and the combined entity will be have a significant technology base in that segment.
"We are very excited about this deal," said Amnon Fisher, chief executive officer of San Jose-based Genesis. "We believe it creates a leader in the display semiconductor industry, with a wide product line and a broad technology portfolio."
Under the terms of this deal, shareholders in Milpitas, Calif.-based Sage will receive 0.571 shares in Genesis for every Sage share they hold. When the transaction is complete, the former Sage holders will own approximately 28 percent of the combined company, which will continue to be called Genesis. The new venture will be headquartered in Alviso, Calif. Fisher said he expects the deal to be accretive to Genesis' profits within the first full quarter of the transaction closing.
Sage reported net sales of $8.1 million in its first fiscal quarter, which ended June 30, putting it on a run-rate of about $32 million annually. The company posted a net loss of $2.7 million for the same period. In the same quarter, Genesis reported sales of $21.3 million and gross profit of $9.9 million.
Chandra Reddy, chief executive officer of Sage, will join the board of Genesis as vice-chairman and will also take the title of executive vice president of engineering. One other Sage executive will join the seven-member board. "We expect the combination of the two companies will better serve the needs of our customers than we could as individual entities," said Reddy.
By acquiring Sage, Genesis will also receive all the technology Sage obtained through its February 2000 acquisition of Faroudja Inc., a supplier of digital display controllers.
Jon Peddie, president of graphics market research firm Jon Peddie Associates (Mill Valley, Calif.), said that Faroudja at the time had one of the best designs for de-interleaving video streams, which is a key element in outputting graphics to HDTV sets or computer monitors. With this technique, systems place images on a screen one line at a time, in order. Current television sets put every odd-numbered line on a screen, then go back and fill in the space by interleaving all the even-numbered lines on the screen. "There's no doubt that Genesis wants to get its hands on that technology," he said.
Both CEOs noted that they had previously considered each other direct competitors, although only parts of their product lines overlapped. "The combined entity will be able to build on the already strong momentum at both companies, and will be better positioned to serve our customers' needs, take advantage of new opportunities and bring more innovative products to market."
Peddie said he was not surprised by the agreement, adding that he considers the companies a good match. "This is a very good strategic move," he said. "It's just another example of the consolidation of the industry."