QUALCOMM plans to buy Atheros Communications for roughly $3.2bn (£2.1bn) in cash, showing its determination to become a major player in supplying chips for smartphones and tablet computers.
Qualcomm is clearly betting that the deal – at a 21.6 per cent premium to Atheros’ share price before talk of the takeover began to circulate – will beef up its position in mobile devices, a market expected to explode in 2011 with new tablet computer offerings to compete against Apple’s iPad.
Atheros’ two biggest customers are Hon Hai Precision Industry and Nintendo, according to its most-recent annual report.
Qualcomm is already a major player in making microchips that handle data crunching and voice communication in phones. But until now, it has made less progress in developing chips for tablet PCs that incorporate advanced networking functions.
Qualcomm said it will pay $45 per share for Atheros. The potential acquisition was first rumoured on Tuesday, sending Atheros shares up 18.9 per cent to $44 on the Nasdaq. Based on 71.6m outstanding Atheros shares as of 20 October, the acquisition is worth $3.2bn. Qualcomm said the “enterprise value” of the transaction is $3.1bn.
Craig Barratt, Atheros’ chief executive, is expected to become president of Qualcomm Networking and Connectivity following the merger.
Qualcomm expects the acquisition to close in the first half of this year, and add “modestly” to earnings per share in its 2012 fiscal year.
City A.M. Reporter