Acquisition Expands MaxLinear's Strategic
Presence in Broadband Access and Connectivity Markets
Acquisition Expected to be Immediately Accretive
to Non-GAAP Earnings; Targeting Greater than $20 Million in Cost
Savings in First Full Calendar Year Post-Close
MaxLinear, Inc. (NYSE:MXL) (or "MaxLinear"), a leading provider of
integrated radio frequency ("RF") and mixed-signal integrated
circuits ("ICs"), and Entropic Communications, Inc. (Nasdaq:ENTR)
(or "Entropic"), a world leader in semiconductor solutions for the
connected home, today announced that they have signed a definitive
agreement for MaxLinear to acquire Entropic. The boards of
directors of both MaxLinear and Entropic have unanimously approved
the transaction.
Entropic shareholders will receive (i) $1.20 per share in cash
and (ii) 0.2200 shares of MaxLinear common stock for each Entropic
common share outstanding. Based on MaxLinear's closing stock price
on February 2, 2015, the merger consideration is valued at
approximately $3.01 per Entropic share. The implied total
transaction value is approximately $287 million and the implied
enterprise value is $181 million, net of Entropic's cash balance as
of December 31, 2014. Shareholders of MaxLinear and Entropic will
own approximately 65% and 35%, respectively, post completion of the
acquisition.
Headquartered in San Diego, Entropic is recognized for
pioneering the MoCA® (Multimedia over Coax Alliance) home
networking standard, inventing Direct Broadcast Satellite ("DBS")
outdoor unit single-wire technology, and developing the industry's
first set-top box SoC platform based on the ARM® processor with
advanced OpenGL graphics. Entropic has a rich history of innovation
and deep expertise in RF, analog/mixed signal and digital signal
processing technologies. Entropic's silicon solutions have been
broadly deployed across major cable, satellite, and fiber service
providers.
The acquisition will add significant scale to MaxLinear's
analog/mixed-signal business, expanding its addressable market and
enhancing the strategic value of MaxLinear's offerings to its
broadband and access partners, OEM customers, and service
providers. MaxLinear sees immediate cross-selling opportunities and
longer-term platform integration opportunities with Entropic's
leading MoCA technology.
Along with broadening MaxLinear's presence in its existing
markets, Entropic adds immediate scale and deep customer
relationships in MaxLinear's most recent growth area of the
satellite Pay-TV market. Entropic's design talents and portfolio of
approximately 1,500 issued and pending patents are highly
complementary, and MaxLinear is uniquely positioned to capitalize
on these assets.
"We are very excited about the opportunity to bring together two
talented and largely complementary teams, as we increase our
capabilities to solve the most difficult analog and mixed-signal RF
challenges in Broadband markets," said Dr. Kishore Seendripu, CEO
of MaxLinear. "We believe the scale and strategic benefits of a
broader technology portfolio will enable us to accelerate our
expansion into new markets more effectively. The financial benefits
of the transaction should be immediately visible, as we expect
non-GAAP earnings accretion in the first full quarter
post-close."
Dr. Ted Tewksbury, Interim President and CEO of Entropic,
commented, "I share Kishore's enthusiasm for this combination,
which we believe maximizes value for Entropic's shareholders,
employees and customers. These are two excellent companies in the
industry, and I believe our stakeholders will benefit from the
resources and scale that the combination will provide."
Other Transaction and Financial Details
As a result of the combination, MaxLinear anticipates it will
achieve operating synergies in excess of $20 million in the first
full calendar year post-close. Increased scale and projected cost
savings are expected to lower combined non-GAAP operating expenses,
generate significant operating margin expansion, and accelerate
MaxLinear's timing to achieving its stated target operating
model.
The transaction is expected to close in the second quarter of
2015 subject to approval by the shareholders of both companies, the
receipt of regulatory approvals, and other customary closing
conditions. MaxLinear will add Dr. Ted Tewksbury to its board of
directors upon closing of the transaction.
Stifel is acting as exclusive financial advisor to MaxLinear.
Barclays is acting as exclusive financial advisor to Entropic.
Wilson Sonsini Goodrich & Rosati, P.C. is acting as counsel for
MaxLinear and Cooley LLP is acting as counsel for Entropic.
MaxLinear Reaffirms Fourth Quarter 2014
Guidance
MaxLinear's fourth quarter 2014 revenue is expected to be in the
range of $32 million to $33 million. This is unchanged from the
Maxlinear's previous guidance.
MaxLinear is reaffirming its prior GAAP and non-GAAP gross
margin and operating expense guidance.
MaxLinear's cash, cash equivalents and investments are expected
to be $79 million as of December 31, 2014.
As previously announced, MaxLinear is scheduled to release its
fourth quarter results on February 9, 2015 and will host a
conference call that day to discuss those results.
MaxLinear Provides First Quarter 2015
Guidance
Revenue is expected to be between $34 million and $35 million
for the first quarter of 2015.
GAAP and Non-GAAP gross margin is expected to be approximately
61% for the first quarter of 2015.
GAAP operating expenses for the first quarter of 2015 are
expected to be $27.5 million. Non-GAAP operating expenses are
expected to be $18.5 million for the first quarter of 2015. For the
reconciliation, please see the table at the end of this
release.
Conference Call / Webcast Details
MaxLinear and Entropic management will host a conference call at
2:00 p.m. Pacific / 5:00 p.m. Eastern to discuss today's
announcement. Supporting materials for the conference call,
including a presentation, will be available on the Investor
Relations sections of MaxLinear's and Entropic's websites at
www.maxlinear.com and www.entropic.com, respectively.
Interested parties may access the conference call via any of the
following:
Teleconference: |
1-888-337-8198 / International:
1-719-325-2402 |
Access Code: |
3138635 |
Web Broadcast: |
http://edge.media-server.com/m/p/bh9atvf5/lan/en |
Replay: |
1-888-203-1112 / International:
1-719-457-0820 |
Replay Passcode: |
3138635 |
A live webcast of the conference call will be accessible from
the investor relations section of the MaxLinear website at
http://investors.maxlinear.com, and will be archived and available
after the call at http://investors.maxlinear.com. A replay of the
conference call will also be available.
About Entropic
Entropic™ (Nasdaq:ENTR) is a world leader in semiconductor
solutions for the connected home. The Company transforms how
traditional HDTV broadcast and IP-based streaming video content is
seamlessly, reliably, and securely delivered, processed, and
distributed into and throughout the home. Entropic's
next-generation Set-top Box (STB) System-on-a-Chip (SoC) and
Connectivity solutions enable Pay-TV operators to offer consumers
more captivating whole-home entertainment experiences by
transforming the way digital entertainment is delivered, connected
and consumed – in the home and on the go. For more information,
please visit Entropic at: www.entropic.com, read our blog Entropic
Topics, or get social with us at @Entropic_News, or on Facebook,
Google+, YouTube and LinkedIn.
The Entropic logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=4255
About MaxLinear
MaxLinear is a leading provider of radio-frequency and
mixed-signal semiconductor solutions for broadband communications
applications. MaxLinear is headquartered in Carlsbad, California.
For more information, please visit www.maxlinear.com.
Cautionary Note Concerning Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements include, among others,
statements concerning MaxLinear's proposed acquisition of Entropic;
anticipated accretion to MaxLinear's earnings; anticipated cost
savings arising from the acquisition; the anticipated timing of the
closing of the acquisition; preliminary estimates of MaxLinear's
fourth quarter 2014 operating results; and MaxLinear's financial
guidance for the first quarter of 2015 including revenue, gross
profit percentage, and operating expense guidance. These
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results to
be materially different from any future results expressed or
implied by the forward-looking statements. Forward-looking
statements are based on management's current, preliminary
expectations and are subject to various risks and uncertainties.
MaxLinear's preliminary estimates of fourth quarter fiscal 2014
revenue, gross profit percentage, operating expenses, and cash are
subject to review by MaxLinear's management and audit by its
independent registered public accounting firm. Actual results could
differ materially as a result of such review and audit. In
addition, risks and uncertainties that could affect the
forward-looking statements set forth in this press release include
the following: failure of MaxLinear's or Entropic's stockholders to
approve the proposed merger transaction; failure to obtain
regulatory approvals; the challenges and costs of closing,
integrating, restructuring, and achieving currently anticipated
synergies; the ability to retain key employees, customers, and
suppliers during the pendency of the merger and afterward; and
other factors generally affecting the business, operations, and
financial condition of either MaxLinear or Entropic, including the
information contained in MaxLinear's respective Annual Reports on
Form 10-K for the year ended December 31, 2013, subsequent
Quarterly Reports on Form 10-Q, and other reports and filings with
the SEC. Additional risks, uncertainties, and other factors
affecting their respective businesses will be contained in
MaxLinear's and Entropic's Annual Reports on Form 10-K for the year
ended December 31, 2014.
Use of Non-GAAP Financial Measures by
MaxLinear
To supplement the financial information MaxLinear has provided
in this press release, including previously estimated financial
metrics for the quarter ended December 31, 2014 and certain
financial guidance MaxLinear has provided for the quarter ending
March 31, 2015, MaxLinear has disclosed management's current
estimates of certain of these metrics on a non-GAAP basis. In
particular, MaxLinear had disclosed estimated GAAP and non-GAAP
gross profit percentage for the fourth quarter of 2014 and has
disclosed estimated GAAP and non-GAAP operating expenses for the
quarter ending March 31, 2015. With respect to GAAP and non-GAAP
gross profit percentage for the fourth quarter of 2014, the amounts
were approximately equal at 60% in a 2% range below and above;
accordingly, MaxLinear has not provided a reconciliation of these
financial metrics. For purposes of its disclosures of non-GAAP
operating expense estimates for the quarter ending March 31, 2015,
it has provided a reconciliation at the end of this press release.
Estimated non-GAAP operating expenses exclude the impact of
estimated stock-based compensation, accruals under MaxLinear's
stock-based performance bonus plan, charges relating to the pending
acquisition of Entropic, charges related to the recently completed
acquisition of Physpeed, and expenses relating to intellectual
property litigation. MaxLinear believes that non-GAAP financial
measures can provide useful information to both management and
investors by excluding certain non-cash and other one-time expenses
that are not indicative of its core operating results. Among other
uses, MaxLinear's management uses non-GAAP measures to compare its
performance relative to forecasts and strategic plans and to
benchmark its performance externally against competitors. In
addition, MaxLinear management's incentive compensation has
historically been determined in part by using non-GAAP performance
measures, which MaxLinear believes better reflect its core
operating performance.
No Offer or Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval with respect to the proposed merger or
otherwise. No offer of securities shall be made except by means of
a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
Additional Information and Where to Find It
In connection with the proposed merger, MaxLinear intends to
file a registration statement on Form S-4 with the SEC, which will
include a preliminary prospectus and related materials to register
the shares of MaxLinear Class A Common Stock to be issued in the
merger, and MaxLinear and Entropic intend to file a joint proxy
statement/prospectus and other documents concerning the proposed
merger with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO
READ THE REGISTRATION STATEMENT, THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED
WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT MAXLINEAR, ENTROPIC, AND THE
PROPOSED MERGER. Investors and security holders will be able to
obtain free copies of the registration statement and the joint
proxy statement/prospectus (when they are available) and any other
documents filed by MaxLinear and Entropic with the SEC at the SEC's
website at www.sec.gov. They may also be obtained for free by
contacting MaxLinear Investor Relations at
http://investors.maxlinear.com/, IR@MaxLinear.com or by telephone
at (760) 517-1112 or by contacting Entropic Investor Relations at
http://ir.entropic.com/, ir@entropic.com or by telephone at (858)
768-3852. The contents of the websites referenced above are not
deemed to be incorporated by reference into the registration
statement or the joint proxy statement/prospectus.
Participants in the Solicitation
Each of Entropic and MaxLinear and their respective executive
officers and directors may be deemed to be participants in the
solicitation of proxies from their respective stockholders with
respect to the transactions contemplated by the merger agreement.
Information regarding the persons who may, under the rules of the
SEC, be deemed participants in the solicitation of MaxLinear or
Entropic security holders in connection with the proposed merger
will be set forth in the registration statement and the joint proxy
statement/prospectus when filed with the SEC. Information regarding
Entropic's executive officers and directors is included in
Entropic's Proxy Statement for its 2014 Annual Meeting of
Stockholders, filed with the SEC on April 3, 2014, and its Current
Report on Form 8-K, filed with the SEC on November 10, 2014, and
information regarding MaxLinear's executive officers and directors
is included in MaxLinear' Proxy Statement for its 2014 Annual
Meeting of Stockholders, filed with the SEC on April 17, 2014 and
its Current Report on Form 8-K, filed with the SEC on December 16,
2014. Copies of the foregoing documents may be obtained as provided
above. Additional information regarding the persons who may, under
the rules of the SEC, be deemed participants in the solicitation of
proxies in connection with the proposed merger will be set forth in
the joint proxy statement/prospectus when it is filed with the SEC.
The interests of such persons may differ from the interests of
MaxLinear or Entropic stockholders generally. MxL and the MaxLinear
logo are trademarks of MaxLinear, Inc.
MaxLinear, Inc.
First Quarter 2015 Operating Expenses Reconciliation to
GAAP
($ in millions) |
1Q 2015 Guidance |
|
|
GAAP Operating Expenses |
$ 27.5 |
Stock-Based Compensation |
(4.0) |
Stock-Based Bonus Plan
Accrual |
(1.4) |
Physpeed Related Charges |
(0.3) |
IP Litigation |
(0.5) |
Entropic M&A Transaction
Expenses |
(2.8) |
Non-GAAP Operating Expenses |
$ 18.5 |
CONTACT: MAXLINEAR CONTACT:
MaxLinear Press Contact:
David Rodewald
David James Agency LLC
Tel: 805-494-9508
david@davidjamesagency.com
MaxLinear Corporate Contact:
Adam Spice
Chief Financial Officer
Tel: 760-692-0711, ext. 196
aspice@maxlinear.com
ENTROPIC CONTACT:
Entropic Corporate and Press Contact:
Debra Hart
Tel: 858-768-3852
debra.hart@entropic.com
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