IDT Acquiring GigPeak For ~$250M
Integrated Device Technology and GigPeak announced a definitive agreement for IDT to acquire GigPeak for $3.08 per share or approximately $250 million in cash. The purchase price is approximately 22 percent higher than the closing price of GigPeak shares on February 10, 2017. The boards of both companies unanimously approved the terms of the agreement.
IDT will acquire GigPeak’s optical interconnect products and technology, which is complementary to IDT's position in real-time interconnect products. According to IDT, GigPeak's optical interface products are broadly used by leading companies in communications, cloud data centers, military and aviation. The combined companies will provide “seamless” ultra-high speed data connectivity products using electrical, RF and optical technologies.
IDT will commence a tender offer to acquire all of the issued and outstanding common stock of GigPeak. The transaction is subject to the majority of GigPeak’s outstanding shares being tendered and the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to close during the second calendar quarter of 2017, at which point GigPeak will be delisted from the New York Stock Exchange and integrated into IDT.
GigPeak employees were told by IDT management that GigPeak will be "run as a standalone business led by Raluca Dinu who will report to Sean Fan, head of IDT Computing and Communications Division." During a call with financial analysts, Greg Waters, IDT's CEO, said "Dr. Avi Katz, who is founder, CEO and chairman of GigPeak, will also serve as special advisor to myself and be a key part of our transition over upcoming months."
Brian White, CFO of IDT, said, "We expect GigPeak to add approximately $16 million of revenue per quarter at approximately 70 percent non-GAAP gross margins. We expect the business to be accretive to earnings in the first full quarter following acquisition close and that it will support our target market of 30 percent non-GAAP operating margin within three full quarters. The synergies required to achieve this model are relatively modest at approximately $5 million per year."
"GigPeak is a recognized leader in high performance optical, RF and video transport technology, and is a perfect fit for IDT. The products, technology, and culture of GigPeak all complement and represent an acceleration of our current strategy," said Waters.
Avi Katz said, “Upon the consummation of this acquisition, our leading product suite, which currently addresses the need for greater bandwidth across the network, will now have the advantage of leveraging the scale of resources and broad distribution channels of IDT."
Strategic alignment between IDT and GigPeak. Source: IDT presentation to GigPeak employees.
Article updated February 15, 2017.