MaxLinear Makes Play For Entropic

In a deal that will further consolidate the silicon market for set-tops, high-speed home networking and cable broadband modems gear, MaxLinear announced Tuesday that it has inked a deal to acquire Entropic Communications. 

Under the deal, Entropic shareholders will receive $1.20 per share in cash and 0.2200 shares of MaxLinear common stock for each Entropic common share outstanding. MaxLinear said the implied total transaction value of the deal is about $287 million, with an implied enterprise value of $181 million, net of Entropic’s cash balance as of Dec. 31, 2015. MaxLinear expects the deal will achieve operating synergies in excess of $20 million in the first full calendar year post-close.

Shares of Entropic were up 21 cents (7.78%) to $2.91 each in after-hours trading Tuesday.

MaxLinear, which expects to close the deal in the second quarter of 2015, is making its move following a recent rough path for Entropic, a San Diego-based  maker of set-top chipsets and Multimedia over Coax  (MoCA) technologies.

Last June, Entropic announced a major restructuring, followed in September with word that its board had authorized the company to pursue “strategic options.” In November, Entropic announced that troubled, former president and CEO Patrick Henry was leaving, naming Dr. Ted Tewskbury (pictured) as its interim president and CEO. At the time, Entropic also said it would discontinue all new set-top box SoC product development.

MaxLinear, which counts Broadcom among its competitors, said the deal with add significant scale to its analog/mixed-signal business, allow it to expand its addressable market, and bolster its intellectual property, noting that Entropic has about 1,500 issued and pending patents.

"We are very excited about the opportunity to bring together two talented and largely complementary teams, as we increase our capabilities to solve the most difficult analog and mixed-signal RF challenges in Broadband markets," said Dr. Kishore Seendripu, CEO of MaxLinear, in a statement.

"I share Kishore's enthusiasm for this combination, which we believe maximizes value for Entropic's shareholders, employees and customers,” added Tewskbury, who will join the MaxLinear board when the deal is wrapped up. “These are two excellent companies in the industry, and I believe our stakeholders will benefit from the resources and scale that the combination will provide."

MaxLinear also reaffirmed fourth quarter guidance, with revenues expected to be in the range of $32 million to $33 million. MaxLinear is to report Q4 results on Feb. 9, 2015.

Entropic announced fourth quarter results on Tuesday (February 3), posting revenues of $42.6 million, and a net loss of $25.5 million, or 28 cents per share. Entropic pulled in revenues of $191.6 million for all of 2014, down from $259.4 million for 2013.