Acquisitions | 6 Months Ended |
Apr. 04, 2014 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
2. ACQUISITIONS |
Acquisition under Common Control—On February 13, 2014, MACOM acquired Nitronex, an entity under common control, whereby MACOM completed the Nitronex Acquisition for $26.1 million in cash for all of the outstanding ownership interests of Nitronex. The purchase price includes $3.9 million held on account by a third-party escrow agent pending any claims by MACOM in connection with general representation matters made by GaAs Labs in the transaction. The escrow agreement expires in August 2015, at which point if no claims are made, all amounts will be paid to GaAs Labs. The Company has assumed no amount from the escrow will be returned to it in the accounting for the Nitronex Acquisition. MACOM funded the Nitronex Acquisition through the use of available cash and borrowings under its revolving credit facility. |
Acquisition of Mindspeed Technologies, Inc.—On December 18, 2013, MACOM completed the acquisition of Mindspeed Technologies, Inc. (Mindspeed), a supplier of semiconductor solutions for communications infrastructure applications (Mindspeed Acquisition). MACOM acquired Mindspeed to further its expansion into high-performance analog products. |
MACOM completed the Mindspeed Acquisition through a cash tender offer (Offer) by Micro Merger Sub, Inc. (Merger Sub), a wholly-owned subsidiary of MACOM, for all of the outstanding shares of common stock, par value $0.01 per share, of Mindspeed (Shares) at a purchase price of $5.05 per share, net to the seller in cash, without interest, less any applicable withholding taxes (Offer Price). Immediately following the Offer, Merger Sub merged with and into Mindspeed, with Mindspeed surviving as a wholly-owned subsidiary of MACOM. At the effective time of the merger, each Share not acquired in the Offer (other than shares held by MACOM, Merger Sub and Mindspeed, and shares of restricted stock assumed by MACOM in the merger) was converted into the right to receive the Offer Price. MACOM funded the Mindspeed Acquisition through the use of available cash and borrowings under its revolving credit facility (see Note 6). The aggregate purchase price for the Shares, net of cash acquired, was $232.0 million and MACOM assumed $80.4 million of liabilities and incurred costs of $4.5 million expensed in the six months ended April 4, 2014. |
The Mindspeed Acquisition was accounted for as a purchase and the operations of Mindspeed have been included in MACOM’s consolidated financial statements since December 18, 2013, the date of acquisition. |
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MACOM is recognizing all assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for Mindspeed is being allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. A preliminary allocation follows (in thousands): |
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Current assets | | $ | 51,801 | | | | | |
Intangible and other assets | | | 253,013 | | | | | |
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Total assets acquired | | | 304,814 | | | | | |
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Current liabilities | | | 34,966 | | | | | |
Debt | | | 39,824 | | | | | |
Other liabilities | | | 5,595 | | | | | |
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Total liabilities assumed | | | 80,385 | | | | | |
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Net assets acquired | | | 224,429 | | | | | |
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Consideration: | | | | | | | | |
Cash paid upon closing, net of cash acquired | | | 232,028 | | | | | |
Fair value of vested awards assumed in acquisition | | | 1,491 | | | | | |
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Total consideration | | | 233,519 | | | | | |
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Goodwill | | $ | 9,090 | | | | | |
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In connection with the Mindspeed Acquisition, MACOM assumed all of the outstanding options and all unvested restricted stock awards under Mindspeed’s equity plans and converted such options and stock awards into equivalent MACOM awards under the same general terms and conditions as were in existence with adjustments made to shares and exercise prices, if any, pursuant to a formula stipulated in the terms of the acquisition. The fair value of the assumed options and stock awards was $4.8 million, of which $1.5 million relates to vested stock options and has been included in the purchase consideration and the remainder relates to unvested stock options and stock awards, which will be expensed as the remaining services are provided. |
The components of the acquired intangible assets on a preliminary basis were as follows (in thousands): |
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| | Above | | | Useful Lives | | |
(Years) | | |
Developed technology | | $ | 118,180 | | | 7 | | |
Customer relationships | | | 12,920 | | | 10 | | |
In-process research and development | | | 21,580 | | | N/A | | |
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| | $ | 152,680 | | | | | |
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The overall weighted-average life of the identified intangible assets acquired in the acquisition is estimated to be seven years and the assets are being amortized over their estimated useful lives based upon the pattern over which the Company expects to receive the economic benefit from these assets. |
The purchase accounting is preliminary and subject to completion, including the areas of taxation where a study of the potential utilization of acquired net operating losses is not yet complete, and certain fair value measurements, particularly the finalization of the valuation assessment of the acquired tangible and intangible assets. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting and would be retroactively reflected in the financial statements as of April 4, 2014 and for the interim periods then ended. |
The following is a summary of Mindspeed revenue and earnings, excluding a restructuring charge and change-in-control payments aggregating $14.9 million, included in MACOM’s accompanying condensed consolidated statements of operations for the six months ended April 4, 2014 (in thousands): |
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Revenue | | $ | 33,809 | | | | | |
Loss from continuing operations before income taxes | | | (22,707 | ) | | | | |
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Subsequent to closing the Mindspeed Acquisition, MACOM divested the wireless business of Mindspeed. The operations of the wireless business are included in discontinued operations and the assets of the wireless business are presented as assets held for sale. The Company completed the sale of the wireless business in February 2014. The accompanying condensed consolidated statement of operations for the three and six months ended April 4, 2014 include the following operating results related to the business to be divested (in thousands): |
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| | Periods Ended April 4, 2014 | |
| | Three Months | | | Six Months | |
Revenue | | $ | 1,983 | | | $ | 2,440 | |
Loss before income taxes | | | (4,007 | ) | | | (7,381 | ) |
Benefit for income taxes | | | 1,507 | | | | 2,776 | |
Loss from discontinued operations, net | | | (2,500 | ) | | | (4,605 | ) |
Supplemental Pro Forma Data |
The pro forma statements of operations data for the six months ended April 4, 2014 below give effect to the acquisition, described above, as if it had occurred at September 28, 2013. These amounts have been calculated after applying MACOM’s accounting policies and adjusting the results of Mindspeed to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets and additional interest expense on acquisition-related borrowings had been applied and incurred since September 28, 2013. The supplemental pro forma earnings for the six months ended April 4, 2014 were adjusted to exclude discontinued operations, acquisition costs of $4.5 million paid by MACOM, seller-related professional fees incurred by Mindspeed prior to the acquisition, amortization and impairments of intangible assets incurred by Mindspeed prior to the acquisition and $14.9 million of restructuring charges and change-in-control payments, as well as the impact of the step-up to fair value of the acquired inventory. This pro forma data is presented for informational purposes only and does not purport to be indicative of the Company’s future results of operations. |
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Revenue | | $ | 211,437 | | | | | |
Net loss | | | (28,234 | ) | | | | |