SAN FRANCISCOChip and IP vendor Gennum Corp. said Thursday (March 19) it would acquire all outstanding shares of Tundra Semiconductor Corp., a supplier of system interconnect products and IP, in a deal valued at $86 million.
Under the terms of the agreement between the two companies, each share of Tundra (Ottawa, Ontario) will be valued at CDN$4.43 ($3.57) in cash or 1.1575 common shares of Gennum (Burlington, Ontario), the companies said. A total of $55 million cash and 8 million common shares of Gennum will be issued to holders of Tundra common shares. The transaction is expected to close on or about June 1.
"We believe that Tundra's strong position with leading communications systems OEMs, particularly in the telecommunications market, as well as its global sales network and foundation of talented employees, will increase Gennum's ability to provide more, high value products to a broader set of markets and will result in increased opportunities for the combined company to grow its business," said Franz Fink, Gennum CEO, in a statement.
In an interview with EE Times Friday, Fink described the acquisition as very complementary and said the two companies have no overlapping products.
Fink said the sagging economy was not a major factor in the decision to go after Tundra and that, thanks to the health of Tundra's balance sheet, Gennum was likely to emerge from the transaction with roughly the same cash position as it has going in.
"It's the right time to continue to move and grow inorganically to emerge even stronger when the market returns," Fink said.
Gennum said the acquisition adds new digital switch and bridge products and functionality to and builds on the company's growth strategy. Gennum expects the deal to augment its global sales and channel network and enable the company to leverage Tundra's customer relationships in regions such as Asia and China.
"By integrating our recognized expertise in high-speed digital products and technologies, talented employees, and extensive sales networks, with Gennum's organization we will increase shareholder value and create new opportunities for the long-term success," said Daniel Hoste, Tundra president and CEO. "Combined, we believe we will create a formidable competitor that is well positioned in high-speed interconnect markets that require signal integrity."
Fink said the fact that both Gennum and Tundra are based in Ontario, Canada is put coincidence, though he added that from a cultural standpoint it may mean a lower risk of problem integrating the two firms.
"If they wouldn't have had the complementary product portfolio, of course we wouldn't have done it," Fink said.
Gennum said it has for the past 18 months focused on strengthening and broadening its high-speed signal integrity portfolio by adding higher levels of digital functionality and integrating features that allow more complex, high-speed signal transport capabilities. This strategy has been pursued in the video broadcast market, where the Gennum's products have been positively received, according to the company.
"The combined portfolio will enable us to offer a broader set of solutions today, and, we
anticipate, to deliver more integrated signal integrity and interconnect products in the future," Fink said.
Gennum said it expects cash synergies of approximately $10 million to be realized following the completion of the transaction from increased efficiencies in all areas of operations.
After the close of the transaction, Gennum is expected to have approximately 43.4 million shares outstanding. Current Gennum shareholders are expected to own approximately 82 percent of the shares, and current Tundra shareholders are expected to own the remaining 18 percent..