In a move that expands its strategic presence in broadband access and connectivity markets, integrated radio frequency and mixed-signal integrated circuits provider MaxLinear is to acquire Entropic Communications, a specialist in semiconductor solutions for the connected home. The boards of directors of both MaxLinear and Entropic have unanimously approved the transaction.
Entropic shareholders will receive (i) $1.20 per share in cash and (ii) 0.2200 shares of MaxLinear common stock for each Entropic common share outstanding. Based on MaxLinear’s closing stock price on February 2, 2015, the merger consideration is valued at approximately $3.01 per Entropic share. The implied total transaction value is approximately $287 million and the implied enterprise value is $181 million, net of Entropic’s cash balance as of December 31, 2014. Shareholders of MaxLinear and Entropic will own approximately 65 per cent and 35 per cent, respectively, post completion of the acquisition.
Headquartered in San Diego, Entropic is recognised for pioneering the MoCA (Multimedia over Coax Alliance) home networking standard, inventing Direct Broadcast Satellite outdoor unit single-wire technology, and developing the industry’s first set-top box SoC platform based on the ARM processor with advanced OpenGL graphics. Entropic has a rich history of innovation and deep expertise in RF, analogue/mixed signal and digital signal processing technologies. Entropic’s silicon solutions have been broadly deployed across major cable, satellite, and fiber service providers.
The acquisition will add significant scale to MaxLinear’s analogue/mixed-signal business, expanding its addressable market and enhancing the strategic value of MaxLinear’s offerings to its broadband and access partners, OEM customers, and service providers. MaxLinear sees immediate cross-selling opportunities and longer-term platform integration opportunities with Entropic’s leading MoCA technology.
Along with broadening MaxLinear’s presence in its existing markets, Entropic adds immediate scale and deep customer relationships in MaxLinear’s most recent growth area of the satellite pay-TV market. Entropic’s design talents and portfolio of approximately 1,500 issued and pending patents are highly complementary, and MaxLinear says it is uniquely positioned to capitalise on these assets.
“We are very excited about the opportunity to bring together two talented and largely complementary teams, as we increase our capabilities to solve the most difficult analogue and mixed-signal RF challenges in Broadband markets,” said Dr. Kishore Seendripu, CEO of MaxLinear. “We believe the scale and strategic benefits of a broader technology portfolio will enable us to accelerate our expansion into new markets more effectively. The financial benefits of the transaction should be immediately visible, as we expect non-GAAP earnings accretion in the first full quarter post-close.”
Dr. Ted Tewksbury, Interim President and CEO of Entropic, said he shared Seendripu’s enthusiasm for the combination, which Entropic believed maximises value for Entropic’s shareholders, employees and customers. “These are two excellent companies in the industry, and I believe our stakeholders will benefit from the resources and scale that the combination will provide,” he declared.
As a result of the combination, MaxLinear anticipates it will achieve operating synergies in excess of $20 million in the first full calendar year post-close. Increased scale and projected cost savings are expected to lower combined non-GAAP operating expenses, generate significant operating margin expansion, and accelerate MaxLinear’s timing to achieving its stated target operating model.
The transaction is expected to close in the second quarter of 2015 subject to approval by the shareholders of both companies, the receipt of regulatory approvals, and other customary closing conditions. MaxLinear will add Dr. Tewksbury to its board of directors upon closing of the transaction.
MaxLinear’s fourth quarter 2014 revenue is expected to be in the range of $32 million to $33 million. This is unchanged from its previous guidance.