STMicro to Pay $336M Cash for Genesis Microchip

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 |  Includes: GNSS, STM
by: SA Eli Hoffmann

STMicroelectronics (NYSE:STM) said Tuesday it has agreed to acquire Genesis Microchip (GNSS) for $336 million ($8.65/share), a 60% premium to Monday's close and 26% higher than the average price over the past two months. STM will finance the deal with balance sheet cash. Genesis's display-controller chips receive and process video signals for viewing on flat-panel displays. Its back-end technology will add to STM's existing portfolio of STB and front-end video technology. "STMicroelectronics is a leader in digital consumer technologies, with a strong position in set-top box compression and decompression technologies and 'front end' processing technologies in digital TV," STM's Philippe Lambinet said. "Genesis is a leader in 'back-end' image and video processing and digital interconnect technologies. The combined company will have the products, technology, IP and expertise to offer best-in-class integrated DTV processing solutions." Morgan Stanley (NYSE:MS) advised STMicro on the deal. Citigroup analyst Paraag Amin commented that based on consensus forecasts, the deal implies a price/book value ratio of 1.1x. "The combined company will have the products, technology, IP and expertise to offer best-in-class integrated DTV processing solutions," he said.

Separately, Texas Instruments (NASDAQ:TXN) noted in a mid-quarter conference call late Monday that seasonal wireless sales were below normal as a result of the deceleration of its 3G contract with Ericsson (NASDAQ:ERIC), which Natixis analyst Gilbert Soubie said in a note is a positive for STMicro, for which volumes on the contract "seem to be increasing as expected."

STMicro shares were down 1.1% in Paris trading Tuesday morning.

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