Deal to Accelerate and Broaden Breakout in Cloud Data Centers; MACOM
Intends to Divest Compute Business within 100 Days of Closing
LOWELL, Mass., November 21, 2016 - MACOM Technology Solutions Holdings,
Inc. (NASDAQ: MTSI) (“MACOM”), a
leading supplier of high-performance analog RF, microwave, millimeterwave and
photonic semiconductor products, today announced it has entered into a definitive
agreement to acquire Applied Micro Circuits Corporation (NASDAQ:AMCC)
(“AppliedMicro”), a global leader in Connectivity and Computing solutions for
next-generation cloud infrastructure and Data Centers, for approximately $8.36
per share, consisting of $3.25 in cash and 0.1089 MACOM shares per share of
AppliedMicro. This price for each share of AppliedMicro represented a 15.4%
premium over the company’s closing price of $7.25 on Friday, November
18th. MACOM intends to divest the
well-positioned but non-strategic Compute business within the first 100 days of
closing.
Transaction Highlights Include:
- Transaction
valued at approximately $770 million for AppliedMicro’s approximately $165
million in TTM revenue (including the Compute business) and $82 million of
cash and short-term investments at September 30, 2016
- MACOM and
AppliedMicro’s pro forma combined TTM revenue was approximately $709
million including AppliedMicro’s Compute business, or approximately $644
million excluding the Compute business
- AppliedMicro’s
Connectivity business is highly complementary to MACOM’s product
portfolio, through the addition of market-leading OTN framers, MACsec
Ethernet networking components and the industry’s leading single-lambda
PAM4 platform
- Transaction
to accelerate MACOM’s significant growth in optical technologies for Cloud
Service Providers and Enterprise Network customers serving the
high-growth, high-margin Data Center market
- AppliedMicro’s
leadership PAM4 solutions based on FinFET technology and custom engagements
with top-tier Data Center and service provider customers is expected to
strengthen MACOM’s competitive position with those customers
- MACOM expects
to improve the profitability of AppliedMicro by divesting the Compute
business and by delivering on substantial revenue and cost synergies
- Excluding the
Compute business, MACOM expects this transaction to be accretive to its
non-GAAP gross margin, non-GAAP operating margin and non-GAAP EPS, in
MACOM’s fiscal year ending September, 2017
- MACOM to
benefit from over $600 million of tax net operating loss carry forwards
Commenting on the transaction, John Croteau, President and Chief
Executive Officer, stated, "This transaction will accelerate and expand
MACOM’s breakout opportunity in Enterprise and Cloud Data Centers. MACOM will
now be able to provide all the requisite semiconductor content for optical
networks - analog, photonic and PHY - from the switch to fiber for long haul,
metro, access, backhaul and Data Center. AppliedMicro’s 100G to 400G
single-lambda PAM4 platform should perfectly complement MACOM's leadership in
analog and photonic components for Data Centers.
“Notably, the IEEE recently recommended the adoption of AppliedMicro’s
single lambda PAM4 solution to be an industry standard for enterprise and Data
Center connectivity, positioning this technology as the solution of choice
going forward. Additionally, AppliedMicro’s Connectivity business aligns well
with MACOM's differentiated, high-growth business model, offering non-GAAP
gross margins well in excess of MACOM’s long term target operating model, long
product life cycles, and sticky customer relationships.”
“AppliedMicro also provides value-added technologies including SerDes,
high speed analog-to-digital and digital-to-analog 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 Center customers.”
MACOM intends to divest AppliedMicro’s well-positioned Compute business
within 100 days from closing the transaction, as the business does not
strategically align with MACOM’s long-term focus. AppliedMicro has been exploring strategic options for the Compute
business and there is known strategic interest among several potential buyers
and investors. MACOM will continue to support Compute customers and partners
during this transition.
“This is an exciting day for AppliedMicro, and we are pleased to be
joining forces with MACOM. 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,” said Paramesh Gopi, President and CEO,
AppliedMicro. “This transaction will
create an industry powerhouse with the scale, deep customer relationships,
innovative technology, and enabling products that will help deliver explosive
growth in Enterprise and Cloud Data Centers.
In addition, this agreement provides a promising path forward for the
Compute business, which is in the process of bringing AppliedMicro’s
highly-competitive third-generation X-Gene processor to market. X-Gene is well-positioned to address the
large opportunity for mainstream server processors with its proven high
performance cores, scalable interconnect and high per socket memory
capabilities.”
MACOM intends to commence a tender offer to purchase each outstanding
common share of AppliedMicro for approximately $8.36 per share, consisting of
$3.25 in cash and 0.1089 MACOM shares per share of AppliedMicro. MACOM will
assume certain equity awards held by AppliedMicro employees. The transaction
value is approximately $770 million in diluted equity value, or approximately
$688 million net of AppliedMicro’s cash position of approximately $82 million
as of September 30, 2016. The transaction is expected to be accretive to
MACOM's non-GAAP gross margin, non-GAAP operating margin and non-GAAP EPS in
fiscal year 2017, excluding the Compute business. AppliedMicro stockholders are
expected to own approximately 15% of the combined company on a pro forma basis.
MACOM expects to pay the cash portion of the acquisition price from cash on
hand. 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.
Evercore is acting as exclusive financial advisor and Ropes & Gray
LLP is serving as legal counsel to MACOM.
Morgan Stanley & Co. LLC is
acting as exclusive financial advisor and Pillsbury Winthrop Shaw Pittman LLP
is serving as legal counsel to AppliedMicro. The board of directors of
AppliedMicro received a fairness opinion from Morgan Stanley & Co. LLC and Needham & Company, LLC.
About MACOM
MACOM enables a better-connected and safer world by delivering
breakthrough semiconductor technologies for optical, wireless and satellite
networks that satisfy society’s insatiable demand for information.
Today, MACOM powers the infrastructure that millions of lives and
livelihoods depend on every minute to communicate, transact business, travel,
stay informed, and be entertained. Our technology increases the speed and
coverage of the mobile Internet and enables fiber optic networks to carry
previously unimaginable volumes of traffic to businesses, homes, and
datacenters.
Keeping us all safe, MACOM technology enables next-generation radars for
air traffic control and weather forecasting, as well as mission success on the
modern networked battlefield.
MACOM is the partner of choice to the world’s leading communications
infrastructure, aerospace and defense companies, helping solve their most
complex challenges in areas including network capacity, signal coverage, energy
efficiency, and field reliability, through its best-in-class team and broad
portfolio of analog RF, microwave, millimeterwave, and photonic semiconductor
products.
MACOM is a pillar of the semiconductor industry, thriving for more than
60 years of daring to change the world for the better, through bold
technological strokes that deliver true competitive advantage to customers and
superior value to investors.
Headquartered in Lowell, Massachusetts, MACOM is certified to the
ISO9001 international quality standard and ISO14001 environmental management
standard. MACOM has design centers and sales offices throughout North America,
Europe, Asia and Australia.
MACOM, M/A-COM, M/A-COM Technology Solutions, M/A-COM Tech, Partners in
RF & Microwave, and related logos are trademarks of MACOM. All other
trademarks are the property of their respective owners. For more information
about MACOM, please visit www.macom.com follow @MACOMtweets on Twitter, join
MACOM on LinkedIn, or visit the MACOM YouTube Channel.
About AppliedMicro
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