Ikanos Communications, a provider of broadband semiconductor and software products for the digital home, has announced the signing of a definitive agreement to purchase the Broadband Ac
Ikanos Communications, a provider of broadband semiconductor and software products for the digital home, has announced the signing of a definitive agreement to purchase the Broadband Access product line from Conexant Systems.
Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Ikanos will purchase Conexant’s Broadband Access product line for USD54m in cash and the assumption of certain employee and facility related liabilities.
In connection with this transaction, Tallwood Venture Capital, an investment firm focused on the semiconductor industry, has agreed to purchase 24 million shares of Ikanos common stock for USD42m, or USD1.75 per share.
Tallwood will also receive warrants to purchase an additional 7.8 million shares of common stock at USD1.75 per share. The warrants will have a term of five years. Upon completion of the transactions, Tallwood Venture Capital will own approximately 45 per cent of the outstanding shares of Ikanos (excluding the warrants).
In addition, following the transaction, George Pavlov, general partner, and Dado Banatao, managing partner, will join Ikanos’ board of directors.
Ikanos’ purchase of Conexant’s Broadband Access product line is subject to customary closing conditions, including stockholder and regulatory approvals, and is expected to be completed in the third quarter of calendar year 2009.
Ikanos expects that the transaction will more than double the company’s revenue, while providing significant leverage in its cost and spending structure. Ikanos also expects that the transaction will be accretive to its non-GAAP earnings per share within the first year after the close of the transaction.
‘With the number of home networks doubling to more than 400 million by 2013 according to analysts, there’s a substantial opportunity for Ikanos to address the need for delivering bandwidth to and throughout the home,’ says Michael Gulett, president and chief executive of Ikanos. ‘We’ll use our strengthened leadership in broadband access as a platform on which to build new offerings that extend multi-play services seamlessly everywhere they are needed.’
Conexant’s Broadband Access product line has traditionally been strong in North America and China while Ikanos has led in Japan, Korea and Europe.
‘The combined company brings together a talented team of employees that pioneered and set the standards for the broadband market,’ says Craig Garen, senior vice president and general manager of Conexant’s Broadband Access business. ‘Going forward, we’ll continue to innovate and create new broadband access and home networking products that deliver enhanced value to the marketplace.’
‘This transaction brings together a powerful combination of leading products, strong customer relationships, and deep technical expertise, all dedicated to the broadband market,’ says George Pavlov, general partner at Tallwood Venture Capital. ‘The new company that emerges will be able to compete more effectively in existing and emerging markets, develop exciting new products, and provide greater value for its most important stakeholders – its customers, investors and employees.’
