LONDON – Mindspeed Technologies Inc., a fabless networking chip company has agreed to acquire PicoChip Ltd, a provider of chipsets for cellular communications such as femtocell basestations, for $51.8 million.
There is an "earn-out" clause that could increase the deal value by $25 million on the achievement of certain unspecified milestones and the earn-out is payable in the first quarter of calendar 2013.
The deal as currently structured is based on a mixture of $27.5 million in cash and 5.19 million new shares of Mindspeed common stock.
The deal will create an enlarged Mindspeed (Newport Beach, Calif.) with a 70 percent market share in 3G/HSPA small cell basestation market and a good pipeline in LTE small cell market, Mindspeed said in a note to investors.
However, the deal would appear to represent a damage limitation exercise for venture capital investors in PicoChip.
PicoChip was founded in 2000 and applied a highly parallel DSP approach to basestation standards implementation. Since then the company is thought to have received more than $100 million from venture capital firms and strategic investors. These include: Atlas Venture, Highland Capital Partners, Pond Venture Partners, The Rothschild Group, Scottish Equity Partners, AT&T, Intel Corp. and Intel Capital and Samsung Ventures America. The company raised about $20 million in series E round of finance announced in June 2010.
The deal has been approved by both boards of directors and is expected to close in the first quarter of 2012, subject to customary and other closing conditions.
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