UPDATE 3-Spansion to buy Israel's Saifun Semi for $368 mln
(Adds analyst comment)
JERUSALEM, Oct 8 (Reuters) - Microchip maker Spansion Inc SPSN.O said on Monday it will buy Israeli flash memory developer Saifun Semiconductors Ltd SFUN.O in a stock and cash deal valued at $368 million to move into technology licensing.
By acquiring Saifun, a partner since 2002, Spansion believes it will be better positioned to compete with its main competitors -- Intel (INTC.O), Samsung (005930.KS) and STMicroelectronics (STM.PA) -- by developing new technologies and diversifying its product base.
"We will be a disruption to them," Bertrand Cambou, president and chief executive of Spansion, told Reuters.
The purchase should also boost the bottom line of Spansion, which is currently generating quarterly net losses, since Saifun is profitable, while freeing Spansion from paying an undisclosed amount in licensing royalties to Saifun.
Saifun, a provider of intellectual property technologies for the non-volatile memory market, posted a 40 percent drop in second-quarter revenue to $9.6 million, largely due to Qimonda's QI.N decision last year to phase out its NROM activity -- eliminating a large source of income for Saifun.
The deal is expected to close in the first quarter of 2008 and needs various regulator and shareholder approvals.
"The acquisition will be a plus from very early on," Cambou said. "There will be acquisition costs in the first quarter but the entire year it will be accretive in 2008.
"Going forward there will be cost reductions since we won't have to pay royalties anymore so that will be a plus," he added.
The company said operating margins would also expand.
Under the deal, each Saifun shareholder will receive 0.7429 shares of Spansion common stock and about $5.05 per share in cash for each share of Saifun common stock, the company said, noting $135 million of net cash will be distributed to Saifun shareholders.
The purchase price values Saifun at $11.26 per share, a premium of 8.5 percent, based on its closing price of $10.38 on Oct. 5 on the Nasdaq.
Deutsche Bank analyst Bob Gujavarty called the deal a "good strategic fit" and maintained Spansion's "buy" rating and $14 price target even as there were some uncertainties with licencees and "unproven" technology.
"The small premium and the fact that Spansion is not contributing additional cash to the transaction makes it affordable for Spansion," he said in a research note.
