SAN JOSE, Calif. & CALABASAS, Calif.–(BUSINESS WIRE)–Tessera Technologies, Inc. (NASDAQ: TSRA) (“Tessera” or the “company”), a leader in developing innovative imaging and semiconductor packaging and bonding technologies and DTS, Inc., (NASDAQ: DTSI) (“DTS”) a premier audio solutions provider for mobile, home, and automotive markets, today announced that they have entered into a definitive agreement under which Tessera will acquire DTS for $42.50 per share, representing a 28% premium to DTS’s 30-day volume weighted average price as of September 19, 2016. The all-cash transaction is valued at approximately $850 million.
The transaction will combine market leading audio and imaging innovators with complementary products, technologies, customer channels and intellectual property assets to enable the creation of an expanded, integrated platform to invent the future of smart sight and sound. Upon completion of the acquisition, the combined company will be one of the world’s leading product and technology licensing companies, with over 450 engineers focused on developing next-generation imaging, audio and semiconductor packaging technologies. In addition, the acquisition adds significant scale and diversifies revenue across end markets and customers. The combined company is forecasted to achieve pro forma 2016 revenue of approximately $450 million, nearly half of which will come from product licensing.
The transaction will be immediately accretive to Tessera’s earnings per share and free cash flow. The combined company is expected to realize $15 million in annualized cost synergies within the first 12-18 months following the closing of the transaction and anticipates revenue synergies from the expansion of addressable markets and leveraging of complementary customer channels and technologies. Tessera intends to fund the acquisition with a combination of available cash on hand and approximately $600 million of committed debt financing from RBC Capital Markets. The combined company will maintain a strong balance sheet with pro forma cash and investments of approximately $100 million. The combined company is expected to generate significant free cash flow that will provide flexibility to retire debt, fund quarterly dividends, explore M&A opportunities, and continue investments into its business units. In order to better reflect the combined company’s capabilities and technologies, a new corporate name and stock symbol will be adopted in connection with the closing of the transaction.
“Our acquisition of DTS’s talented team and industry-leading products will represent a transformational step in the execution of Tessera’s strategic vision, with exciting new product development and marketing opportunities. We expect this acquisition to be immediately accretive to Tessera’s earnings and accelerate growth. Our complementary technology portfolios are ideally suited to deliver the next generation of audio and imaging solutions to mobile, consumer electronics, and automotive markets while expanding our ability to address incredible new opportunities in IoT and AR/VR,” said Tom Lacey, Tessera CEO. “I am particularly excited that Jon Kirchner and the exceptional DTS team will join the Tessera family as we continue to grow and expand the DTS brand.”
“This is an exciting transaction that provides substantial and immediate value to our shareholders. We look forward to working closely with Tom and the Tessera team to achieve a smooth integration and pursuing the attractive opportunities ahead,” said Jon Kirchner, chairman and CEO of DTS. “We believe that as part of Tessera we will be in a unique position to deliver the world’s leading audio and imaging solutions to all of our key markets and drive meaningful value for our combined customers, partners and employees.”
Combined company profile:
- DTS’s innovative audio solutions include, among others, DTS-HD® and DTS:X™ audio codecs, DTS Headphone:X® and DTS Sound™ pre-and post processing solutions , DTS Play-Fi® wireless audio, and HD Radio™
- Tessera’s world-class FotoNation®, Invensas and intellectual property businesses, which have developed and licensed technologies that ship globally in billions of devices
- A major technology presence in the consumer electronics, mobile, automotive and semiconductor markets
- A superior R&D team made up of over 450 imaging, audio and semiconductor packaging engineers
- Significant sales channel leverage with immediate mobile and automotive customer cross-selling opportunities
- At the closing of the transaction, Lacey will continue to serve as CEO and Kirchner is expected to join as President of the combined company.
Transaction Structure and Terms
Under the terms of the definitive agreement, Tessera will acquire DTS in an all cash transaction valued at approximately $850 million. DTS equity awards will be assumed or exchanged for cash upon closing of the transaction, in accordance with the terms of the definitive agreement. DTS stockholders will become entitled to receive $42.50 per share in cash at the time of the closing. Additionally, all of DTS’s outstanding debt will be retired at the closing of the transaction.
The transaction has been unanimously approved by both companies’ respective Boards of Directors. Closing of the transaction is expected by late fourth quarter of 2016 or early first quarter of 2017, and is subject to regulatory approval as well as the approval of DTS’s stockholders and other customary closing conditions.
Advisors
GCA acted as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Tessera; Centerview acted as financial advisor and DLA Piper LLP acted as legal advisor to DTS.
About Tessera Technologies, Inc.
Tessera Technologies, Inc., including its Invensas and FotoNation subsidiaries, licenses technologies and intellectual property to customers for use in areas such as mobile computing and communications, memory and data storage, and 3D-IC technologies, among others. Our technologies include semiconductor packaging and interconnect solutions, and imaging products and solutions for mobile and other vision systems. For more information call +1.408.321.6000 or visit www.tessera.com
Tessera, the Tessera logo, Invensas, the Invensas logo, FotoNation, the FotoNation logo are trademarks or registered trademarks of affiliated companies of Tessera Technologies, Inc. in the United States and other countries. All other company, brand and product names may be trademarks or registered trademarks of their respective companies.
About DTS, Inc.
Since 1993, DTS, Inc. (Nasdaq: DTSI) has been dedicated to making the world sound better. Through its pioneering audio solutions for mobile devices, home theater systems, cinema, automotive and beyond, DTS provides incredibly high-quality, immersive and engaging audio experiences to listeners everywhere. DTS technology is integrated in more than two billion devices globally, and the world's leading video and music streaming services are increasingly choosing DTS to deliver premium sound to their listeners’ network-connected devices. For more information, please visit www.dts.com.
