IRVINE, Calif. -- In a move to enter chip markets for optical storage systems and flat-panel displays, Intersil Corp. on Sunday announced plans to acquire Elantec Semiconductor Inc. of Milpitas, Calif., for $1.4 billion in stock and cash.
The acquisition is aimed at combining Elantec's presence in analog optical storage and flat-panel display applications with Intersil's product activities in wireless local area networks and power management, said the two companies, which have signed a definitive purchase agreement. The transaction is expected to be completed in the second quarter following shareholder approval and clearance from regulatory agencies.
Once the purchase is completed, Intersil president and CEO Greg Williams will become executive chairman of the company's board of directors. He will focus his activities on corporate, wireless, and analog strategies, said Intersil. Rich Beyer, Elantec president and CEO, will become president and CEO of Irvine-based Intersil. Beyer and current Elantec chairman Jim Diller will join Intersil's board of directors.
In addition to addressing optical storage and flat-panel display applications, Elantec's product offerings in communication ICs and standard analog will "strengthen Intersil's portfolio of analog ICs," Williams said. "The product lines are complementary and will enhance Intersil's unique value proposition to our strategic customers," he said. "We believe that Elantec's systems level approach and core design competencies in high speed, high precision analog ICs fit well with Intersil's strategy."
The combined company will have "one of the industry's strongest balance sheets, with greater than $550 million in cash after the transaction and no debt," said Dan Heneghan, chief financial officer of Intersil.
The CFO said the orders for Intersil products were running above expectations in the current quarter. "We now expect first quarter revenues to increase sequentially by 6-to-8%, vs. Intersil's previous guidance of 3-to-5%," he said. In the prior quarter, ended Dec. 28, Intersil's revenues were $121.6 million, which was a 7.2% sequential increase from Q3 of 2001.
"Increased wireless demand is driving most of the upside," Heneghan said. "Earnings per share should also increase to $0.13, vs. guidance of $0.12." Intersil reported an adjusted net income of $0.12 per share, or $13.3 million, in Q4.
Under the terms of the acquisition agreement, Elantec shareholders will receive 1.24 shares of Intersil stock and $8.00 in cash for each Elantec share. Based on Intersil's closing price of $36.65 per share on March 8, the implied transaction exchange ratio is 1.458 shares of Intersil stock for each Elantec share.
Intersil said it expects the acquisition to result in cost savings through the consolidation of the two companies. With these cost savings and excluding the impact of amortization expenses, Intersil said it expects the acquisition to be accretive to its 2003 earnings per share.