RF Micro splashes cash on Sirenza acquisition
Top-ranked GaAs chip maker RF Micro Devices is to consolidate its leading position with the acquisition of fellow RFIC specialist Sirenza Microdevices.
Already approved by the two companies directors, the deal will cost RFMD around $900 million in total, $300 million of which will be paid in cash and the rest in RFMD stock.
Whereas RFMD is acknowledged as the market leader in power amplifiers for cell phone handsets (market research firm Gartner cites a 41 percent market share in 2006), the North Carolina company is heavily dependent on the handset market, which makes up 94 percent of its sales.
Sirenza s revenues, on the other hand, are generated by a somewhat more diverse range of applications, including broadband and cable TV, wireless connectivity, wireless network infrastructure and defense.
RFMD s Bob Bruggeworth, who will remain as CEO of the combined companies following the completion of the deal, said: "Our two businesses are highly complementary in terms of customers, markets, products and manufacturing expertise."
The two firms have pursued very different business models when it comes to chip manufacturing. RFMD runs the world's largest MBE facility for GaAs wafer fabrication, whereas Sirenza has followed a fabless strategy.
Nitride benefits
At a conference call to discuss the deal, Bruggeworth and Sirenza CEO Bob Van Buskirk were both keen to state how GaN technology would benefit from the move.
GaN is crucial to RFMD s strategy, as the firm s management expects to be able to sell products based on the wide-bandgap material at a much higher profit margin compared with those based on GaAs.
Although RFMD has pioneered GaN chip development, and Bruggeworth says that a "tremendous number of customers" are keenly evaluating the technology already, the company has not generally been recognized as a major supplier for wireless infrastructure applications, the most obvious end market for GaN.
On the other hand, Sirenza s expertise in high-end components for wireless infrastructure has seen it establish strong relationships with the likes of Huawei and ZTE, the leading Chinese network systems companies. Those customers are keen to source GaN components for their high-speed networks.
Now, the combination of Sirenza s customer relationships and RFMD s manufacturing power should provide a boost for GaN commercialization, with Van Buskirk anticipating that the technology will have a significant role to play in all of Sirenza s existing market sectors.
Although the acquisition still requires approval from the shareholders of both companies, as well as the relevant regulatory bodies, it is expected to be completed by the end of the year.
Assuming that the transaction goes ahead as planned, the Sirenza business will become the major part of RFMD s new "multi-market products group".
Van Buskirk will move to North Carolina to lead that business division in the future.
Valued at $16.64 per share, RFMD s offer represents a 17 percent premium over Sirenza s stock value at the market close on August 10.
