In October 2015, pioneering audio technology company DTS took a bold step into the radio industry by acquiring HD radio’s exclusive licensor and developer in the U.S., iBiquity Digital Corp. for $172 million.
As of today, HD Radio’s future will be tied to a developer of imaging and semiconductor packaging and bonding technologies.
In a deal announced today, Tessera Technologies has agreed to acquire DTS. The deal calls for Tessera to pay $42.50 per share for DTS stock, representing a 28% premium to DTS’s 30-day volume weighted average price as of Monday, Sept. 19.
The all-cash transaction is valued at approximately $850 million.
According to the companies, the merger allows for the combination of “market leading audio and imaging innovators with complementary products, technologies, customer channels and intellectual property assets to enable the creation of an expanded, integrated platform to invent the future of smart sight and sound.”
Upon completion of the acquisition, the combined company will be one of the world’s leading product and technology licensing companies, with more than 450 engineers focused on developing next-generation imaging, audio and semiconductor packaging technologies.
According to an 8-K filing with the Securities and Exchange Commission, the deal will see DTS become the surviving corporation, and become a subsidiary of a set-to-be-renamed “Holdco.” This new entity intends to have its common stock listed on Nasdaq, replacing DTS and Tessera common stock as seen today.
The combined company is forecast to achieve pro forma 2016 revenue of approximately $450 million, nearly half of which will come from product licensing.
In a joint statement, the companies said the transaction will be immediately accretive to Tessera’s earnings per share and free cash flow. The combined company is expected to realize $15 million in annualized cost synergies within the first 12-18 months, following the closing of the transaction, and anticipates revenue synergies from the expansion of addressable markets and leveraging of complementary customer channels and technologies.
Tessera intends to fund the acquisition with a combination of available cash on hand and approximately $600 million of committed debt financing from RBC Capital Markets.
“Our acquisition of DTS’s talented team and industry-leading products will represent a transformational step in the execution of Tessera’s strategic vision, with exciting new product development and marketing opportunities,” said Tessera CEO Tom Lacey. “We expect this acquisition to be immediately accretitive to Tessera’s earnings and accelerate growth.”
Lacey added that the companies’ complementary technology portfolios “are ideally suited to deliver the next generation of audio and imaging solutions to mobile, consumer electronics, and automotive markets.”
Jon Kirchner, DTS’s Chairman/CEO, added, “We believe that as part of Tessera we will be in a unique position to deliver the world’s leading audio and imaging solutions to all of our key markets and drive meaningful value for our combined customers, partners and employees.”