* Zoran shareholders to receive 1.85 CSR shares per share
* Deal values Zoran at about $679 mln
* Deal at 40 percent premium to Zoran share price on Friday
* CSR shares down 8 pct
(Adds further reaction, advisers, updates shares)
By Paul Sandle
LONDON, Feb 21 CSR CSR.L has agreed to buy
U.S.-listed Zoran Corporation ZRAN.O in a $679 million
all-share deal that adds imaging and video to the British
chipmaker's wi-fi, bluetooth and GPS location technologies.
CSR's Chief Executive Joep van Beurden said the deal would
enable CSR to offer more capabilities to consumer electronics
companies in an increasingly competitive market.
"The combined entity is going to be in a position to be very
relevant to camera manufacturers," he said in an interview on
Monday. "The same is true for digital televisions, in cars, in
gaming and in handsets."
Shareholders in Zoran, which also has operations in Israel,
will receive 1.85 CSR shares for each Zoran share, implying a 40
percent premium to Zoran's closing price on Friday. CSR will own
65 percent of the combined group, with completion expected in
the second quarter.
Zoran had $260 million of cash, CSR said, of which it would
return up to $240 million to shareholders in a share buyback.
The market was cautious on the deal, marking down shares in
CSR, which have risen 34 percent in the last three months, by
8.1 percent at 399 pence by 1245 GMT.
Analysts questioned whether the deal would bolster CSR's
position in mobile phones, where it has lost ground to rivals
better positioned in smartphones. [ID:nLDE7180B3]
"CSR had to be more than a pure play connectivity business
and this at least gives them some of that aspect," said Lee
Simpson, an analyst at Jefferies & Co, who has a "hold" rating
"But what they've bought in return is fresh issues to deal
with, primarily where is the value going to be created in
Numis gave an initial welcome to the transaction, saying it
had strong potential.
"We believe the transaction provides attractive
diversification and scale and a strong opportunity for CSR to
become a leading provider of chips which enable the digital
connected consumer," the broker said.
"lt has many of the hallmarks of CSR's acquisition of SiRF,
a deal which has been very successful."
CSR, which competes with Broadcom (BRCM.O) and Qualcomm
(QCOM.O), added GPS location services to its bluetooth and wi-fi
technologies with the acquisition of SiRF in 2009.
Van Beurden, who will lead the combined group, said the
deal would help CSR in mobile phones in the longer term.
"There is a lot of opportunity to add the video
technologies that Zoran brings to the table," he said.
"Don't expect that to happen overnight but with the strong
footprint and excellent relations in the handset market, we will
certainly bring that to bear."
The combined group, which will have revenue of about $1.25
billion from customers like Sony (6758.T) and Samsung
(005930.KS), would optimise its technologies before creating
single chips with multiple services in 18-24 months, he said.
Cost savings would be $50 million a year by 2012, by which
time the deal would boost earnings by double digits, he said.
J.P Morgan Casenove and Rothschild advised CSR, while
Goldman Sachs advised Zoran.
(Editing by Mark Potter and Jane Merriman)