Texas Instruments Inc said yesterday that it plans to acquire Unitrode Corp, a manufacturer of semiconductors for managing battery life and power supply in mobile electronic devices, in a $1.2bn stock deal. TI said it expects to issue about 8.9 million shares in exchange for all outstanding shares of Unitrode, or about $38.60 for each Unitrode share. Alun Roberts, worldwide marketing director for advanced analog products said TI chose to acquire Unitrode because it was the leading manufacturer in its field.
Specifically it makes three types of circuit boards TI wants to get its hands on. Power supply controllers are the circuits that manage a device’s connection to the external power supply, and battery management circuits monitor the amount of battery time left and enables that information to be displayed on screen for the user to see. TI says it will sell these first two boards to manufacturers of notebook computers and cellphones and says that it already has a number of partnerships with leading vendors in both markets. These include Compaq Computer Corp, Dell Computer Corp and Gateway Inc in the laptop arena, and LM Ericsson Telefon AB and Nokia Oy in the cellphone market. The third type of circuit boards are called termination devices and control the interface between a notebook PC and a docking station.
These are very attractive market areas for TI and they’re not areas in which we currently have any presence, said Roberts. Dataquest says the total available market for analog chips in 1998 was worth $21.6bn, with a projected growth rate of more than 15% for 1999, while the power management segment was worth $2.2bn in 1998 and is expected to reach $4.1bn by 2002. Roberts said the purchase further made sense because Unitrode had limited contacts and partnerships in the countries of the leading consumer electronic device makers, particularly Japan, whereas he said that TI already has well-established links with those manufacturers. In addition, while Unitrode makes the actual circuits themselves, it lacks the necessary packaging and semiconductor technology to integrate with the circuits; another area of expertise for TI, he said. So all in all we’re a very good match, Roberts said, adding that the combination of the two companies would make TI the largest power management chip manufacturer in the world.
Under the deal, all 840 Unitrode employees will become TI staff and there are currently no plans for relocation. Analysts said the price paid for Unitrode seemed fair compared with the valuation of comparable companies in the chip industry. It’s a good acquisition. It fills out their product line and it’s not costing them too much, said Jonathan Joseph of Salomon Smith Barney, it will be neutral for earnings per share this year and slightly positive next year.
