Integrated Device Technology Inc. (IDT) and Integrated Circuit Systems Inc. (ICS) said Wednesday evening they plan to merge in a deal valued at $1.7 billion.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, ICS stockholders will receive 1.3 shares of IDT common stock and $7.25 of cash for each share of ICS stock. Based on Wednesday's closing prices, that makes the deal worth approximately $1.7 billion.

IDT is a Silicon Valley-based maker of network communications ICs; ICS is a Norristown, Penn.-based supplier of timing silicon devices.

"ICS has excelled in providing timing technology to consumer, PC and DIMM customers," Greg Lang, IDT president and CEO, said in a statement. "We believe that the merger will enable customers to benefit from a stronger company with a diverse product portfolio and enhanced resources.

"The merged company will have an outstanding base of technology, customers and talent to pursue growth opportunities in communications, computing, and consumer market segments," Lang said. "Combining our resources will allow us to pursue these opportunities more effectively than we could as separate entities.

"From a financial perspective, the transaction will be accretive to IDT's fiscal year 2007 earnings per share," he continued. "IDT's existing manufacturing infrastructure is an excellent fit to the products and roadmap of ICS; we believe that capturing related efficiencies will allow the combined company to increase its ability to deliver innovative solutions to its customers as well as value to its stockholders."

For its part, the merger will give ICS access to broader markets, the company said.

"Combining IDT with ICS will allow us to complement our strength in timing devices for consumer and computing customers with IDT's leadership in a wide range of communications products," Hock Tan, president and CEO of ICS, said in a statement. "IDT's track record of solutions support and its position and technology in the communications market, are a good complement to our timing and circuit expertise."

Lang will serve as president and CEO of the combined company and Tan will assume the role of chairman of the board of the combined company, with an executive role in the integration of ICS with IDT, the companies said. "The board of directors of the combined company will have nine members, with IDT designating five directors, including Lang, and ICS designating four directors, including Tan.

For the twelve months ending March 31, 2005, the combined company had revenues of approximately $645 million and generated $86 million in cash flow. The combined company will retain the IDT name and its stock will continue to trade on the Nasdaq national market under the ticker symbol IDTI. The merged company will be headquartered in San Jose, Calif.

Based on the most recent capitalization, current IDT stockholders will own approximately 54 percent and current ICS stockholders will own approximately 46 percent of the combined company. The transaction is subject to customary closing conditions, including shareholder and regulatory approvals; the companies expect to close the deal in the fall of this year.

IDT and ICS directors and executive officers have entered into voting agreements pursuant to which they have agreed to vote their shares in favor of the transaction.

Morgan Stanley is acting as financial advisor to IDT and Latham & Watkins LLP is acting as legal advisor to IDT with regard to the transaction. Lehman Brothers and Piper Jaffray acted as financial advisor to ICS and Kirkland & Ellis LLP is acting as legal advisor to ICS with regard to the transaction.

By: DocMemory
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