MACOM reaches Definitive Agreement to acquire Mindspeed Technologies

The transaction value is approximately $272 million in diluted equity value, or $246 million net of Mindspeed's cash position of approximately $26 million as of September 27, 2013. MACOM expects to finance the acquisition through a combination of cash on hand and its existing undrawn revolving credit facility. The boards of both companies have approved the transaction, which is subject to customary closing conditions and regulatory approvals. MACOM currently expects the transaction to close by the end of calendar 2013.

Commenting on the transaction, John Croteau, President and Chief Executive Officer stated, “This acquisition will position MACOM as a leading global provider of 100G optical solutions which underscores our growth strategy in commercial communications markets. Our interest in Mindspeed is the company’s high-growth, high-margin HPA business as well as its cash-generating VoIP business. The addition of the HPA portfolio, which consists of the world’s fastest crosspoint switches, ultra low power signal conditioners and industry-leading optical PMDs, aligns well with MACOM’s business model -- offering non-GAAP gross margins approaching 70%, long product life cycles, and sticky customer relationships.”

MACOM estimates that the acquisition will result in substantial synergies from corporate overhead, SG&A, and exit from underperforming businesses. MACOM also expects that the acquisition will be accretive to non-GAAP earnings per share between $0.15 and $0.20 in fiscal 2014 and between $0.25 and $0.30 in fiscal 2015.

Mindspeed is also in advanced discussions with a potential strategic buyer for its wireless business, which it intends to sell prior to closing of the MACOM transaction. Mindspeed also has a communications processor business, which currently does not align with MACOM’s long-term strategic focus, and therefore additional options will be explored while continuing to support its customers. Separately, in the event Mindspeed’s wireless business is not sold, it will be restructured and wound down while continuing to support its customers.

Mr. Croteau added, “Mindspeed’s leadership in SiGe-based products, along with its long-held position in enterprise video and metro markets, complements our strong position in long-haul modulator drivers based on Indium Phosphide (InP) and Gallium Arsenide (GaAs) technology. This will position MACOM as a clear leader across all 100G segments, all physical layer products, and all requisite technologies enabling us to capitalize on the expected decade-long build out of the 100G optical market.”

Highlights of the transaction include:

- The companies’ combined trailing twelve months (TTM) revenue is approximately $451 million with non-GAAP gross margin of approximately 50%, excluding Mindspeed’s wireless business.
- Cash transaction valued at $272 million for Mindspeed’s $132 million in TTM revenue (excluding wireless business and non-recurring revenue from sales of intellectual property) and $26 million of cash and cash equivalents at September 27, 2013.
- MACOM expects substantial annual synergies from reduction in corporate overhead, corporate R&D overhead, SG&A and exiting underperforming businesses.
- Expected to be immediately accretive to MACOM’s non-GAAP earnings per share with expected non-GAAP EPS accretion between $0.15 and $0.20 per share in fiscal 2014 and between $0.25 and $0.30 per share in fiscal 2015.
- Positions MACOM to be a global leader in 100G optical networking and expands MACOM’s addressable market, moving from long-haul to data centers and metro markets.
- Complements MACOM’s current product offerings with a high performance analog (HPA) portfolio of low latency crosspoint switches, integrated optical physical media devices (PMDs) and low power signal conditioners.
- Diversifies MACOM’s served markets to include Enterprise applications.
- Expands MACOM’s addressable RF and Microwave market with the addition of high performance Silicon Germanium (SiGe) capability.
- Complements MACOM’s strong U.S. presence with a broadened customer footprint and strong sales channel in the Asia Pacific region.