NEW YORK (The Deal) -- Chipmaker Exar (EXAR - Get Report) is casting a wider net through an agreement to acquire onetime Samsung division Integrated Memory Logic for $223 million, a move that will give the buyer exposure to the consumer market for the first time.
Fremont, Calif.-based Exar announced Sunday, April 27, that it was launching a tender offer through its wholly owned subsidiary Image Sub Ltd. to acquire all outstanding shares of IML for approximately $3 a share, as well as the remaining shares at the same price in accordance with a follow-on merger.
The net transaction value will be approximately $94 million, taking into account cash acquired, Exar said. That represents an enterprise value-to-sales multiple of about 1.4 times, based on sales of approximately $67 million over the last 12 months, according to Cowen & Co. managing director Timothy Arcuri. The company is paying a trailing price-to-earnings multiple of about 17 times, he added.
IML designs and makes optical and flash storage technology for display and LCD panels that are used by tablets, notebooks, PC monitors and LCD televisions. Its shares are listed on the Taiwan Stock Exchange, however the company's headquarters are in San Jose, Calif. Among the target's competitors are Maxim Integrated Products (MXIM - Get Report), Texas Instruments (TXN - Get Report), Intersil (ISIL - Get Report), Analog Devices (ADI - Get Report), Silicon Mitus and Richtek.
The $223 price tag, or $94 million net of cash, represents a good deal for Exar and is largely the result of IML losing Apple (AAPL - Get Report) as a customer last year, industry observers indicated.
"They're coming in and buying this company at a time where the valuation is very depressed ... [IML's] stock had been in the penalty box because of the loss of the Apple iPad Air business and the [deal's] valuation reflects that loss," Arcuri said over the phone, adding that he believes IML will have the opportunity to re-engage with Apple and expand in China.
The tender offer is set to expire at 3:00 pm in Taipei, Taiwan on May 29, while the deal is expected to close in the second quarter of fiscal 2015, or Sept. 19, 2014 in Taiwan. The transaction remains contingent on the minimum tender of 70% of IML's outstanding shares and approval from the target's shareholders.