Semiconductor maker Integrated Device Technology (IDT) has reached an agreement to take over rival Integrated Circuit Systems (ICS) in a cash-and-stock deal valued at around US$1.7 (AU$2.2 billion.)
"This is merger of two successful companies," IDT Chief Executive Officer Greg Lang said during a conference call with analysts. "We believe this is a complementary fit bringing scope and scale to both companies."
IDT generated net income of US$13 million last year on US$391 million in sales of its semiconductor devices for networking equipment. ICS, headquartered had net income of US$78.5 million on sales of US$272.1 million in its last fiscal year.
Lang, who will remain CEO of the combined company, said the two vendors have some competitive overlap in the communication and PC component market, but also have diverse product portfolios in other areas, like the digital TV and military device markets. He expects the acquisition to extend IDT's product line while saving the enlarged company up to US$50 million a year, within the next four years, by reducing redundant spending.
ICS CEO Hock Tan will become chairman of the combined company's nine-member board, to which IDT will designate five directors and ICS will appoint four.
The deal calls for ICS shareholders to receive 1.3 shares of IDT stock and US$7.25 in cash per ICS share, a combined value of around US$23.54, based on Wednesday's closing price of IDT shares on the Nasdaq exchange. In Thursday trading, IDT shares dropped 8 percent to close at US$11.51, while ICS shares rose 10 percent, to US$21.77.
Pending shareholder and regulatory approvals, the companies expect the deal to close toward the end of 2005.