IDT to buy GigPeak to better deliver optical comms

16 Feb 2017

$250m deal creates "new franchise" in optical interconnect; extends IDT’s lead in comms and cloud data center markets.

IDT expects GigPeak to add approximately $16m of revenue per quarter.

Integrated Device Technology and GigPeak have this week signed a definitive agreement for IDT to acquire GigPeak (formerly GigOptics until mid-2016), for $3.08 per share, valuing the deal at approximately $250 million. IDT says the acquisition will provide it with “a highly regarded optical interconnect product and technology business that is complementary to our leadership position in real-time interconnect products.”

GigPeak's optical interface products are already widely used in the communications, cloud-based data center, and military/aviation markets. IDT says it will now provide the market with “seamless ultra-high speed data connectivity products using electrical, RF, and optical technologies".

Gregory Waters, IDT President & CEO, said, "GigPeak is a leader in optical, RF, and video transport and is a perfect fit for IDT. Their products, technology and culture all complement and represent an acceleration of our strategy. We also gain an exceptional group of talented people and valuable intellectual property with the GigPeak team."

Dr. Avi Katz, Founder, Chairman and CEO of GigPeak, said, “Following this acquisition, our leading product suite, which addresses the need for greater bandwidth across the network, will have the advantage of accessing the scale of resources and distribution channels of IDT."

The Boards of Directors of both companies have already unanimously approved the terms of the merger agreement, and the Board of Directors of GigPeak has resolved to recommend that stockholders accept the offer, once it is commenced.

Analysts’ conference

Brian White, IDT’s Chief Financial Officer, told an analysts’ conference following the announcement of the deal, “To fund this acquisition, IDT plans to raise approximately $200 million in debt financing, with the balance of the purchase price to come from existing cash on its balance sheet. We anticipate the transaction will close in the second calendar quarter of 2017.”

“We expect GigPeak to add approximately $16 million of revenue per quarter at approximately 70% non-GAAP gross margins. The business will be accretive to earnings in the first full quarter following acquisition close and it will support our target market of 30% non-GAAP operating market within three full quarters. The synergies required to achieve this model are relatively modest at approximately $5 million per year.”

Greg Waters, IDT Chief Executive Officer, added, “We have recently established a strong RF business, which provides high-speed data connectivity solutions for the wireless Internet. GigPeak will now provide us with optical interconnect business, which puts IDT at the center of high-speed data connectivity. We now will have to significant advantage of combining valuable intellectual property and expertise between our teams.”