Semiconductor and optical supplier MACOM Technology Holdings has agreed to buy Applied Micro Circuits Corp. in a cash and stock deal worth approximately $770 million.
AppliedMicro develops semiconductors for connectivity and compute applications. MACOM is purchasing the company for its connectivity business, and plans to divest the non-strategic compute business within the first 100 days of closing.
The connectivity business is highly complementary to MACOM’s own product portfolio, the company says, and will accelerate its growth in optical technologies for cloud service providers and enterprise network customers serving the data centre market.
Commenting on the transaction, John Croteau, president and chief executive officer, said: “MACOM will now be able to provide all the requisite semiconductor content for optical networks – analogue, photonic and PHY – from the switch to fibre for long haul, metro, access, backhaul and data centre.”
AppliedMicro’s connectivity portfolio includes OTN framers and MACsec Ethernet networking components and what they describe as the industry’s leading single-lambda PAM4 platform. Croteau points out that the IEEE recently recommended the adoption of AppliedMicro’s single-lambda PAM4 platform as an industry standard for enterprise and data centre connectivity, positioning it as the technology of choice going forward.
Croteau continued: “AppliedMicro also provides value-added technologies including SerDes, high-speed analogue-to-digital and digital-to-analogue converters with industry-leading engineering competencies and long product lifecycles. Importantly, we expect that this transaction will establish MACOM with an incumbent position supplying strategic components and enterprise and cloud data centre customers.”
MACOM intends to divest AppliedMicro’s compute business, as the business does not align with the company’s long-term focus. AppliedMicro has been exploring options for the compute business and says there is “strategic interest among several potential buyers and investors”. MACOM will continue to support compute customers and partners during the transition.
“This is an exciting day for AppliedMicro, and we are pleased to be joining forces with MACOM said Paramesh Gopi, president and chief executive, AppliedMicro. “The transaction affirms the value that our employees have created and provides a strong path forward for our Connectivity business while delivering AppliedMicro stockholders a robust premium.”
MACOM will make an offer to purchase each outstanding common share of AppliedMicro for approximately $8.36 per share, consisting of $3.25 in cash (from cash in hand) and 0.1089 MACOM shares, giving AppliedMicro stockholders a 15 per cent stake in the combined company. MACOM will also assume certain equity awards held by AppliedMicro employees. The transaction value is about $770 million in diluted equity value, or approximately $688 million net of AppliedMicro’s cash position of $82 million.
The boards of directors of both companies have approved the transaction, which is subject to customary closing conditions and regulatory approvals. MACOM currently expects the transaction to close in the first calendar quarter of 2017.