It has appeared for months that MIPS Computer Systems Inc needed to be acquired by one of its partners in order to secure the company’s future and that of its R-series RISC family (CI No 1,878), and yesterday the identity of the rescuer became known as Mountain View, California-based Silicon Graphics Inc announced definitive agreement to acquire the Sunnyvale, California company for 0.61 a share for each MIPS outstanding, valuing MIPS at a heady $406m at the closing price of $26.63 before the announcement. The price works out at $16.25 a share for MIPS, which closed at $11 on Wednesday night. Silicon Graphics shares were unchanged in early trading yesterday, while MIPS was up $3.125 at $14.125. After the merger, the companies, which will have combined turnover approaching $1,000m a year, plan to create a new company, MIPS Technologies Inc, under MIPS chairman and chief executive Robert Miller, to focus exclusively on leading-edge RISC technologies and enhance the strength of the Advanced Computing Environment initiative. Three seats will be added to Silicon Graphics’ board for MIPS representation, one of which will be occupied by Miller. As a result of its recent buy-back of convertible preferred stock from Compaq Computer Corp, Silicon Graphics will have to re-issue between 3.9m and 5.4m common shares or equivalent convertible securities prior to closing to enable the transaction to qualify as a tax-efficient pooling-of-interests. Morgan Stanley & Co and Unterberg Harris are acting as financial advisors to Silicon Graphics, and Donaldson Lufkin & Jenrette and On Point Developments Inc are financial advisers to MIPS in connection with the transaction, which is expected to close at the end of June. There is not likely to be much opposition to the deal because of the relatively small size and specialised nature of Silicon Graphics, although Kubota Corp with a 17% stake in MIPS, which would translate to a smaller one in Silicon Graphics, is a direct competitor with its Kubota Computer Corp graphics workstations. But many other MIPS RISC users would have been unhappy had the company gone to another minority shareholder Digital Equipment Corp or to its Japanese licensee, NEC Corp.
