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M/A-COM buyer plans communications sell-off

If a deal between Tyco Electronics and Cobham goes through then M/A-COM's Massachusetts GaAs fab and its related non-military businesses will be put on the market.

UK defense firm Cobham is poised to buy M/A-com for $425 million, but is not interested in the company's GaAs and SiGe chip-making operations.

Instead, Cobham s target is the company s suite of microwave and millimeter-wave defense products, which include missile guidance and fusing subsystems, and transmitters and receivers for electronic warfare. It claims that M/A-COM is currently the biggest OEM supplier of microwave defense subsystems in the world.

The deal to buy M/A-COM from current owners Tyco Electronics is due to be completed in the second half of 2008. Cobham then plans to sell the non-defense business “for a price that supports the business case” around three months later. This segment currently comprises around 60 percent of M/A-COM s total annual revenue.

“A lot of M/A-COM s commercial business is foundry products,” said Allan Cook, Cobham s chief executive. "We have experience in buying these components "“ [but] we have no experience of design and manufacture.”

More precisely, the commercial business sells semiconductor devices and components for wireless communications, including cellular base stations and WiMAX infrastructure, and RF identification components for inventory management.

“We don t have the capability to make the most of them,” Cook admitted.

Separating the defense and commercial business will demand a division of the Lowell, Massachusetts, site where M/A-COM s GaAs fab is currently situated. This is likely to see the Lowell-based defense functions relocate, possibly to an existing Cobham address in Massachusetts.

The defense company says that it has not yet decided whether to sell the whole commercial business together or split it into pieces, but is confident that it will be done quickly.

“Based on the encouraging level of interest believed to have been expressed during Tyco Electronics auction, Cobham anticipates this can be divested expeditiously,” the company said.

Cobham says that it values M/A-COM s defense business highly and will now pump in more cash than had been the case at Tyco, where it was a “non-core business”.

“We ve known M/A-COM for many years and tracked it very carefully,” Cook said.

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