Philips Electronics NV finally got what it has wanted for months, and yesterday announced an agreement to acquire VLSI Technology Inc for $1.04bn plus the assumption of about $160m in debt. The deal calls for Philips to acquire all of VLSI’s shares for $21 each in cash and ends the hostile bid for the company which Philips launched in March. The agreed price represents an 11% premium over VLSI’s Friday closing price of $18.875 and a 23.5% increase over the $17 per share in the original unsolicited offer. After the deal closes, VLSI will become part of the $4.5bn Philips Semiconductors business unit and will make Philips the world’s sixth-largest semiconductor company.
To carry out the purchase, Philips will amend its existing tender offer to increase the purchase price and will extend the expiration date of the offer to May 14. It will also abandon other actions related to the unsolicited takeover attempt, including its legal attempt to oust the VLSI board of directors. Philips already owns 1.2 million of VLSI’s 46.6 million shares and says that about 237,000 shares were tendered under the unsolicited offer. Philips will also cash out options on an additional 11.3 million VLSI shares. VLSI’s board has given it seal of approval to the new deal in a unanimous vote and has recommended that VLSI shareholders accept the amended cash tender offer.
Philips went public with its intent to acquire the San Jose-based chip maker on February 26 and got hostile less than a week later, as it took the offer directly to VLSI shareholders on March 4. VLSI rejected the offer outright and began holding talks with other potential bidders. On April 8, the two companies reached an agreement to give Philips access to insider information, and discussions on a revised offer began.
Philips says that after reviewing the non-public VLSI information and meeting with management, it concluded that the company was worth more than the $777m it had been offering. Philips also asserts that the two companies have complementary operations with almost no product overlap and says it looks forward to combining VLSI’s digital expertise and capabilities in wireless communications, computer networking and ASICs with its own strengths in wireless, multimedia, automotive and consumer electronics. Job cuts at VLSI are projected to be minimal, with less than 10% of the company’s 2,200 staff expected to receive pink slips.
