RFMD and TriQuint have announced a definitive merger agreement under which the companies will combine in an all-stock transaction. This was announced at the Mobile World Congress on the 24th of Feburary in Barcelona. To reflect the nature of this transaction as a merger of equals, the new company ("NewCo") will have a new name and shared leadership team. The boards of directors of both RFMD and TriQuint have unanimously approved the transaction.
The merger will create new growth opportunities in three large global markets - mobile devices, network infrastructure and aerospace/defense - with scale advantages, innovative new products and a greatly improved operating model. RFMD and TriQuint together will offer the industry's broadest portfolio of critical enabling technologies to develop and commercialize tightly integrated solutions at record speeds. The combination will foster a new wave of exciting mobile devices that are broadly accessible and offer dramatically higher data throughput, to the benefit of carriers and consumers alike. The combination also creates a leader in infrastructure and defense (with approximately $500 million in annual revenue), with a broad portfolio of products and foundry services supporting applications including radar, next generation base stations, optical communications, and the Internet of Things.
With today's transaction, which is intended to qualify as a tax-free reorganization, TriQuint shareholders will receive 1.675 shares of NewCo and RFMD shareholders will receive 1 share of NewCo for each TriQuint or RFMD share held. At the closing of the transaction, the companies will execute a one-for-four reverse stock split resulting in approximately 145 million shares outstanding.
Former shareholders of RFMD and TriQuint will each own approximately 50 percent of the new company post-merger. The transaction represents an implied price of $9.73 for eachTriQuint share, representing a 5.4% premium based on the closing price of $9.23 for TriQuint on February 21, 2014. The combination is expected to achieve at least $150 million in cost synergies; $75 million in annualized synergies exiting the first year after closing and an additional $75 million exiting the second year. The transaction is expected to be accretive to non-GAAP EPS in the first full fiscal year following the closing of the transaction.
This transaction combines complementary product portfolios, featuring power amplifiers (PAs), power management integrated circuits (PMICs), antenna control solutions, switch-based products and premium filters - and leverages these to deliver the industry's most comprehensive portfolio of high-performance mobile solutions. It will also strengthen the combined company's service to the infrastructure and defense/aerospace industries and enable advanced gallium nitride (GaN) solutions for additional markets and applications.
The new company will have a shared leadership team. TriQuint CEO Ralph Quinsey will serve as non-executive Chairman, and RFMD CEO Bob Bruggeworth will serve as Chief Executive Officer. The board of directors will be made up of ten directors, with five directors from the existing board of each company. Eight of the ten directors will be independent. TriQuint CFOSteve Buhaly will serve as Chief Financial Officer and RFMD CFO Dean Priddy will serve as Executive Vice President of Administration, reporting to the CEO and responsible for integration and synergy value creation. Additional senior leaders of the combined company will include RFMD's Eric Creviston as President of mobile products, TriQuint's James Klein as President of infrastructure and defense products, TriQuint's Steven Grant as Corporate Vice President for Fab Technology & Manufacturing and RFMD's Jim Stilson as Corporate Vice President for Assembly/Test Technology & Manufacturing. Other leaders will be named later this year.
The transaction is expected to close in the second half of calendar 2014 subject to approval by the shareholders of both companies, the receipt of regulatory approvals, and other customary closing conditions.
BofA Merrill Lynch is acting as exclusive financial advisor to RFMD. Goldman Sachs is acting as exclusive financial advisor to TriQuint. Perkins Coie is acting as counsel for TriQuint andWeil, Gotshal & Manges LLP and Womble Carlyle Sandridge & Rice, LLP are acting as counsel for RFMD.
