SAN FRANCISCO—U.K.-based wireless chip supplier CSR plc said Friday (June 17) it decreased the value of its offer to acquire U.S. imaging and video chip vendor Zoran Corp. in the face of Zoran's falling earnings. CSR's new offer is valued at about $484, a decrease of nearly 29 percent from the original offer of $679 million.
Under the revised terms of the deal, CSR will pay $6.26 in cash and 0.6 shares of shares of CSR for each share of Zoran. The original acquisition agreement, announced in February, called for an all stock transaction in which Zoran shareholder would receive 1.85 shares of CSR for each share of Zoran.
The boards of directors of both companies approved the revised agreement, though the approval by Zoran's board was reportedly not unanimous. A spokesperson for Zoran did not immediately respond to a question about the board's vote.
"Both companies agreed that it was in our mutual best interests to revise the deal terms," said Levy Gerzberg, Zoran's president and CEO, in a statement. "Under the revised terms, Zoran stockholders will receive increased certainty of value through the inclusion of a significant cash component, while still retaining upside in the combined group and its larger scale and synergies through the stock component."
Net of Zoran's cash balance at the close of March of $251 million, the new agreement values Zoran at $233 million. Following the transaction, Zoran stockholders would own about 16.5 percent of CSR under the valuations of the companies at the close of the market Thursday. The deal is now expected to close during the third quarter, the companies said.
Since the acquisition was announced Feb. 21, CSR said, several developments have impacted the near-term outlook of Zoran, including the March 11 earthquake and tsunami in Japan and the announcement by Cisco Systems Inc. that it would discontinue the popular Flip video camera—which Zoran said would negatively impact revenues in the second quarter and the rest of 2011.
The original deal was announced in February after a string of losses and agitation of the company's board of directors by hedge fund Ramius LLC. Ramius, which had said in a letter to the board that it believed Zoran's shares were undervalued, also expressed concern that the original CSR acquisition agreement undervalued the company.
Both CSR and Zoran confirmed guidance for the second quarter. CSR said it expects sales of $190 million to $195 million in the second quarter and Zoran said it continues to expect revenue of $80 million to $85 million.
These companies are twins. The stock chart comparing these two track practically as if they were the same company. I'm betting Zoran was insisting on cash and CSR wanted a way to spin why they caved ("lesser offer in terms of valuation due to poor recent showing"). The irony is that Zoran's weakness is mirrored by CSR's - CSR offers less because Zoran looks weaker of late and Zoran wants cash because CSR looks... weaker of late.
These two companies are twins; the stock chart comparing these two looks practically as if they are the same company. I figure that Zoran was insisting on cash and CSR was looking for a way to spin why they caved - "a lesser offer [in terms of overall valuation] due to recent weakness". The irony is that CSR offers less because Zoran looks weaker of late, and Zoran wants cash because CSR looks... weak[er of late].
If Zoran could figure itself in the Flip then it can do better than go with CSR. Who knows with all the samrt phone deluge where the next order is going to come from. Zoran meanwhile can do very well to re-evaluate it's core startegy and consolidate it's businesses to cater to a particular segment.