Cable Operators

Zoran To Acquire Microtune For $166 Million

9/08/2010 10:31 AM Eastern

Zoran, a manufacturer of chips for consumer electronics, plans to acquire silicon tuner supplier Microtune for about $166 million in cash.

With the deal, Zoran will step up its focus on the set-top box market as part of a strategy to become a complete provider of solutions for consumer home entertainment devices. "This strategic acquisition will enhance our position in the core markets we serve and expand our worldwide presence, improving Zoran's ability to serve our customers," Zoran president and CEO Levy Gerzberg said in a statement.

Microtune's customers include Arris, Cisco Systems, Motorola, Panasonic, Samsung and TiVo. The Plano, Texas-based company had 276 employees worldwide as of Dec. 31, 2009, after cutting approximately 10% of its work force last October.

Microtune had "actively explored a broad range of strategic alternatives" over the last several months, according to president and CEO James Fontaine. "The board of directors concluded that the Zoran acquisition is the best solution to deliver value to our shareholders," Fontaine said in a statement. "We believe there is a great strategic fit between our businesses and Zoran and this transaction will also benefit our customers and employees."

Under the agreement, Zoran will pay $2.92 in cash for each share of Microtune's common stock, resulting in a transaction price of approximately $166 million, or $84 million net of cash acquired.

Zoran shares fell more than 6% in trading Wednesday morning, to about $7.67 per share. Microtune's stock climbed more than 18%, to around $2.92 per share.

Sunnyvale, Calif.-based Zoran develops chips for a variety of digital entertainment and imaging markets, including digital TVs, set-top box, DVD players, digital cameras, multimedia mobile phones and multifunction printers.

Zoran expects Microtune's RF tuner silicon and system-on-a-chip products to let it provide a more complete solution from a single supplier, allowing customers to reduce time-to-market for future generations of multituner, DOCSIS-enabled cable set-top boxes.

According to Zoran, the deal also will strengthen its position in digital TV as the market moves to single-chip TV tuners over the next several years. In addition, by combining the advanced demodulator technologies of both companies, customers will be able to obtain fully integrated receivers as multiple new standards for demodulation emerge in various worldwide geographies, Zoran said.

Both companies' boards have approved the transaction, which is expected to close in the fourth quarter of 2010 pending Microtune shareholder approval, regulatory clearance and other usual conditions.

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