Israeli company Mellanox Technologies Ltd. (Nasdaq:MLNX), which develops end-to-end interconnect solutions for servers and storage systems has announced that it is acquiring EZchip Semiconductor Ltd. (Nasdaq: EZCH; TASE:EZCH) (NASDAQ: EZCH; TASE: EZCH). Both companies are Israeli and headquartered in Yokneam near Haifa.
Mellanox will acquire 100% of EZchip’s outstanding ordinary shares for a cash purchase price of $25.5 per share for a deal value of roughly $811 million (approximately $620 million net of cash). This is a 16% premium on the company's share price.The terms of the transaction have been unanimously approved by both the Mellanox and EZchip Boards of Directors.
EZchip develops high-performance processing solutions for carrier and data center networks. The company has undergone a major shakeup this year after announcing in May that its largest customer, communications giant Cisco Systems would not be using the new generation of EZchip processors but rather developing its own. In the first quarter of 2015, Cisco was responsible for 35% of EZchip's revenue - about $9.5 million, so that Cisco's decision will have a major impact on future revenue.
Mellanox said that buying EZchip is a step in its strategy to become the leading broad-line supplier of intelligent interconnect solutions for the software-defined data centers. It added that EZchip’s products and expertise in security, deep packet inspection, video, and storage processing enhances Mellanox’s leadership position, and ability to deliver complete end-to-end, intelligent 10, 25, 40, 50, and 100Gb/s interconnect and processing solutions for advanced data center and edge platforms. The combined company will have diverse solutions to enable customers to meet the growing demands of data-intensive applications used in high-performance computing, Web 2.0, cloud, secure data center, enterprise, telecom, database, financial services and storage environments.
Mellanox president and CEO Eyal Waldman said, “The synergies between EZchip and Mellanox create attractive opportunities. We expect our combined technologies, and product portfolios to deliver leading end-to-end intelligent interconnect and processing solutions to data centers and wide area networks. The new and emerging Web 2.0 and cloud applications that influence our day-to-day lives depend on fast data movement and processing. Mellanox’s interconnect provides the fastest and most-scalable solution for moving data within the data center, allowing the continuous development, use and expansion of these applications. EZchip’s processing solutions allow users to process and analyze, at wire speed, data both within and outside the data center. The solutions from the combined company will enable data center customers to meet the growing demands of data-intensive applications. We expect that the acquisition of EZchip’s technologies and team will better position us to offer further capabilities for smarter interconnect and processing solutions at 100Gb/s and beyond. As our second significant acquisition in Israel, we are confident in our ability to effectively integrate the talented teams from EZchip and Mellanox. We are looking forward to work together to build a successful company.”
EZchip CEO Eli Fruchter said, “Joining forces with Mellanox represents numerous synergies that create a true powerhouse for connectivity and processing. With Mellanox's leading layer 1 - 3 connectivity solutions for data centers and EZchip's leading layer 3 7 processing solutions for carrier networks, the two companies complement each other in technology, products, markets served and customers. Together, we enable a multitude of layer 1 through 7 solutions for data centers and carriers."
The combined businesses currently have 2,400 employees, and have generated combined revenue of $668 million for the twelve months ended June 30, 2015.
The transaction is projected to close in the first quarter of 2016, subject to the completion of certain closing conditions. Mellanox expects the transaction to be non-GAAP accretive from day one.
J.P. Morgan acted as exclusive financial adviser in the deal and provided a financing commitment to Mellanox and Herzog Fox & Neeman and Latham & Watkins LLP acted as Mellanox’s legal counsel. Barclays Bank PLC and an affiliate provided investment banking services to EZchip in relation to its proposed acquisition by Mellanox. Naschitz, Brandes, Amir & Co. and Carter Ledyard & Milburn LLP acted as EZchip’s legal counsel.
Published by Globes [online], Israel business news - www.globes-online.com - on September 30, 2015
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