Cambridge, England-based CSR has purchased SiRF for the equivalent of $136 million. CSR is a maker of wireless chips and owns plenty of intellectual property related to Bluetooth, while San Jose-based SiRF is (or was) a global powerhouse in the GPS chip market.
According to the merger announcement, SiRF shareholders will receive 0.741 of a common share in CSR for each SiRF share. At the $136 million purchase price, this is a 91 percent premium to SiRF’s February 9 closing price of $1.08 and a premium of 57 percent to its three month average closing price. Once the deal closes, SiRF shareholders will own 27 percent of the merged group which will be a US-based CSR subsidiary.
There is no better time than now for SiRF to sell. The company had an awful time in 2008 amid falling chip prices initially, and then lack of consumer demand as the global economy entered turmoil. As if this wasn’t enough, the company recently announced plans to let go 25 percent of its staff and an ITC Commission ruled that SiRF stop imports of certain PND’s containing chips infringing on Broadcom patents. The feud between SiRF and Broadcom has been long-running and the latter has recently filed a new infringement case.
CSR will pick up a fair amount of cash from SiRF and add a whack of IP to its roster. While it does have some GPS technology, the addition of SiRF chips will likely allow the company to create combo chip designs with multiple radios on a single silicon wafer. Not surprisingly, Broadcom has been busy announcing combo chipsets the past few days.
The deal will also cut $35 million in costs, expected to be implemented within 60 days of the deal’s completion, and leave the new company with $378 million cash balance. The acquisition is also expected to be accretive to earnings per share by the second half of 2009.
Executive Chairman and acting chief executive officer Dado P. Banatao has been invited to join the CSR Board as Non-Executive Director while SiRF founder Kanwar Chadha has been asked to join as Executive Director.
The merger is expected to be completed in June 2009 subject to the usual shareholder and regulatory approvals.
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