Parthus Technologies plans to merge with the intellectual property licensing arm of DSP, a US-Israeli group, in a deal which will return $60 million (€68 million) to the Irish company's shareholders.
The merger would create a new firm called ParthusCeva, based in the US, although some senior management would remain in Dublin.
DSP shareholders would own 50.1 per cent of the new company, with Parthus shareholders holding the rest. Parthus shareholders will also receive a cash payment worth about $60 million as part of a capital repayment, equivalent to about seven pence sterling per share.
The merger is expected to be completed by the end of the third quarter. It is contingent on receipt of a tax ruling from DSP Group's relevant authorities but preliminary contacts suggested it would not be a problem, said Parthus. The two sides announced last night that Mr Brian Long, co-founder and chief executive of Parthus, would net a payment worth just under £8 million sterling (€13 million) from his existing 20 per cent stake in the company. He will serve as vice-chairman of the new firm, and will see his stake reduced to about 10 per cent.
Despite the slight difference in shareholding in the deal, Mr Long said it represented a "merger of equals" for the two companies. He said the rationale was to create a leading intellectual property firm.
If the merger is cleared, ParthusCeva would become one of the top three global intellectual property firms, and would count nine of the top 10 semiconductor firms among its customers. "Some of the largest semiconductor firms and equipment manufacturers approached us about this," said Mr Long. "We will now be able to offer them a wider range of solutions."
DSP Group technology is incorporated in more than 100 million mobile handsets per year giving the firm a 25 per cent share of the market, said Mr Long.
There would also be synergies from combining the sales organisation and management team but this would not result in job cuts in the Republic, he added.The combined firm should generate revenues of about $75 million in 2003 and profits of $17-18 million, according to projections.
As part of the deal, DSP will inject an additional $40 million in the new firm, boosting its overall cash balance to about $80 million.
ParthusCeva will have a primary listing on the Nasdaq market, as the new company will have its headquarters in the United States. It will have a secondary listing in London.
But some analysts queried the merits of the deal for Parthus. Nomura analyst Mr Sean Murphy said it appeared to represent a loss of independence for Parthus in a deal that favoured DSP. He said the merger would see Parthus change business direction away from general-purpose microprocessor cores to digital signal processors. Mr Long said ParthusCeva would not be in competition with ARM which was a key partner.
The executive team of ParthusCeva will have several of Parthus's existing management including president, Mr Kevin Fielding, who will become the chief executive of the new firm.
Ms Elaine Coughlan, currently chief financial officer at Parthus, will become chief financial officer of ParthusCeva, and Mr Eoin Coughlan, currently chief operating officer of Parthus, will become executive vice-president and chief operating officer of ParthusCeva.
Parthus co-founder and executive vice-president for corporate development, Mr Peter McManamon, and chairman Mr Mike Pierce will step down from the board to pursue other interests.
Parthus shares initially surged 10 per cent on news of the deal but these early gains were wiped out later in the day and the stock closed down 1.75 pence sterling at 42 pence. This values Parthus at almost £218 million sterling, well below the £2 billion market capitalisation it achieved during the technology boom in mid-2000.
