Oct, 2001 : GlobeSpan and Virata Merge in $1.3 Billion Transaction

📅 October 2, 2001 - GlobeSpan, Inc. (globespan.net) and Virata Corp. (virata.com) has jointly announced that they have signed a definitive agreement to combine in a strategic merger of equals creating the world's leading provider of integrated circuits, software and system designs for DSL solutions.

The stock-for-stock transaction, which was approved by the boards ofdirectors of both companies, will create a combined enterprise with the mostcomplete range of broadband access chipset solutions in the rapidly growingDSL market.
The new company will have combined pro forma revenues of $528 million forthe twelve months ended June 30, 2001, and a combined marketcapitalization, based on current market valuations, of approximately $1.3billion. It will have a strong balance sheet, offering substantialfinancial flexibility, with approximately $700 million of pro forma cash andcash equivalents and debt of approximately $135 million.
GlobeSpan, a provider of DSL physical layer solutions, and Virata, a leaderin integrated software and communications processors for DSL applications,share a vision to create a communications semiconductor company. Both arestrong, dynamic enterprises with highly complementary products, technologyroadmaps and customers. The combined company, which will be known asGlobeSpan Virata, will be headquartered in Red Bank, New Jersey, withoperations around the world.
It will provide complete high-speed DSL access solutions to more than 300customers that manufacture broadband access equipment enabling a full rangeof voice, video and data services for businesses and consumers. Under theterms of the merger agreement, Virata stockholders will receive 1.02 sharesof GlobeSpan common stock for each Virata common share held.
After the merger is completed, on a fully diluted basis, GlobeSpanstockholders will own approximately 52.5% of the combined company, andVirata's stockholders will own approximately 47.5% of the combined company.The merger will be accounted for as a purchase and is expected to betax-free to Virata shareholders.
The companies expect the transaction to generate annual synergies ofapproximately $30-$35 million beginning in the first full year followingcompletion of the transaction.
It is anticipated that the transaction will be accretive to GlobeSpanearnings within twelve months following completion. Completion of thetransaction, which is expected to occur within three to six months, issubject to regulatory approvals, approval by the stockholders of bothcompanies and customary closing conditions. Significant shareholders of bothcompanies have agreed to vote shares representing approximately 10% of theshares of each company in favor of the transaction.
Armando Geday, president and CEO of GlobeSpan, who will be CEO of thecombined company, said: "This combination is an opportunity for bothcompanies and our respective employees, customers and shareholders toparticipate in the upside potential of an enterprise with enhanced scale andglobal market presence. Our two companies have highly complementary productsand technology road maps and share a common vision of the direction andpotential of the DSL marketplace. Supported by world-class engineeringresources and a strong cash position, we will be the industry leader inproviding and supporting next-generation integrated software and siliconnetworking solutions for the broadband market."
Virata expects that for the quarter ending Sept. 30, 2001, its revenues willtotal approximately $30 million. GlobeSpan expects that its revenues for thesame period will total approximately $46 million. Both companies expect tooffer additional guidance in connection with their next earningsannouncements.
Morgan Stanley is acting as financial advisor to GlobeSpan with regard tothe transaction, and Credit Suisse First Boston is advising Virata.