Under terms of the deal, Agere will pay $30.5m in cash to acquire the Raanana, Israel-based company. It will also issue roughly 70.3 million shares of its Class A common stock, valued at about $114.6m based on the closing price of $1.63 on March 7. The impact of the acquisition on fiscal 2005 earnings per share is expected to be minimal.
Agere said the acquisition will enhance its ability to address evolving cellular technologies with integrated chips and software for the 3G market and widely anticipated future demand for High Speed Downlink Packet Access technology. Agere and Modem-Art have already secured multiple 3G/UMTS designs with leading wireless device manufacturers for phones and PC card applications.
Modem-Art was founded in 1998 by entrepreneurs Shlomo Gadot and Yossi Kofman, who are still serving as its co-CEOs. It specializes in developing programmable chips for third-generation wireless broadband telecommunications. The chips are for handsets that operate on W-CDMA technology, and handle all the communications protocols.
Agere is the former micro-electronics division of telecommunications equipment giant Lucent Technologies Inc. It has a market cap of $2.76bn and in 2004 posted a net loss of $90m on sales of $1.91bn. The $30m cash element of the acquisition will be deducted from Agere’s sizable cash and cash equivalents pile of $686m.
According to reports, the acquisition is good news for Modem-Art’s investors because it will give them a fivefold return on their investment. The company is thought to have raised $27.9m in funding, but has yet to make to make any sales.
All 40 Modem-Art employees will join Agere and will be based in Israel.
