ViXS to sell itself to Pixelworks for $20.2M (U.S.)

Mr. Sohail Khan reports

 

PIXELWORKS TO ACQUIRE VIXS SYSTEMS

 

Pixelworks Inc. and ViXS Systems Inc. have entered into a definitive agreement under which Pixelworks will acquire all of the outstanding common shares of ViXS in an all-stock transaction consisting of approximately 3.7 million shares of Pixelworks common stock valued at approximately $20.2-million (U.S.). At the effective closing date, each share of ViXS will be exchanged for 0.04836 of a share of Pixelworks' common stock. The exchange ratio is equivalent to consideration of 26 U.S. cents per ViXS common share, based on the closing price of Pixelworks on May 17, 2017. Based on a 60-day trailing average stock price for Pixelworks of $4.65 (U.S.) per share and 21 Canadian cents (15 U.S. cents) per share for ViXS, the transaction represents a premium of approximately 47.7 per cent.

Transaction highlights

 

Pixelworks expects that the transaction will:

 

Strengthen its patent portfolio with the addition of more than 470 issued and pending worldwide patents held by ViXS;

Broaden its product offerings and diversify revenue across end markets;

Provide incremental scale and research and development to pursue expanded technology development;

Create an opportunity to offer premium visual processing and end-to-end video delivery solutions;

Advance ViXS's industry leading cord-cutter OTA platform for viewing broadcast video content;

Be accretive to its full-year 2018 earnings per share.

President and chief executive officer of Pixelworks, Todd DeBonis, commented: "Today's announced acquisition of ViXS represents a unique opportunity to strengthen our position as a known technology leader with extensive visual and video processing expertise. In addition to adding highly complementary technology and product offerings, the transaction is expected to provide the potential to meaningfully accelerate the development of comprehensive end-to-end video streaming solutions. Similar to Pixelworks, ViXS has a long heritage in visual processing solutions with a team of engineers that have deep technical expertise. ViXS divested its legacy MoCA business earlier this year and narrowed its strategic focus to efficient delivery solutions for high-quality video, including best-in-class transcoding and decoder technologies.

 

"Additionally, Pixelworks' acquisition of ViXS holds the potential to deliver meaningful value to our respective customers and shareholders. Importantly, we expect the acquisition to be accretive to Pixelworks' full-year 2018 earnings, even when considering the dilution. The transaction also combines the intellectual property and R&D [research and development] resources of the two companies in support of current and future product development efforts."

 

Commenting on the proposed acquisition, Sohail Khan, president and chief executive officer of ViXS, said: "This transaction represents a compelling opportunity to achieve greater scale and market penetration with our best-in-class UHD/HDR solutions for consumer and video delivery infrastructure market segments. Additionally, Pixelworks' acquisition of ViXS is expected to provide not only world-class engineering and technology, but a joint platform to monetize industry-leading innovation into significant value to our customers, employees and shareholders."

 

Additional transaction details

 

ViXS's board of directors has, after consultation with its financial and legal advisers and based on the recommendation of its special committee of independent directors established to consider the transaction, determined that the proposed transaction is fair to ViXS's shareholders and in the best interests of ViXS, and it recommends that ViXS shareholders vote in favour of the transaction. Needham & Company, acting as financial adviser to ViXS, delivered a fairness opinion to the ViXS board of directors. The transaction has also been approved by Pixelworks' board of directors.

 

The transaction will be effected by way of a court-approved plan of arrangement under the Canada Business Corporations Act. The transaction is subject to a number of closing conditions, including approval by the Ontario Superior Court of Justice (commercial list) and obtaining certain third party consents. The arrangement agreement provides for customary deal protections, including a non-solicitation covenant by ViXS. A copy of the arrangement agreement will be available under ViXS's profile on SEDAR.

 

ViXS will hold an annual and special meeting of shareholders no later than July 28, 2017, to conduct the annual business of the company and to consider the transaction. For the transaction to proceed, it must be approved by at least 66-2/3rds per cent of the votes cast at such meeting.

 

The directors and officers of ViXS and certain shareholders, collectively holding 36 per cent of ViXS's common shares, have entered into support and voting agreements and agreed to vote their common shares in favour of the transaction at the meeting.

 

Further information regarding the transaction will be included in an information circular to be mailed to ViXS shareholders in due course. The transaction is expected to close in the third calendar quarter of 2017.

 

Pixelworks' legal counsel is Pillsbury Winthrop Shaw Pittman LLP in the United States and Stikeman Elliott LLP in Canada, and ViXS's legal counsel is Gowling WLG in Canada and David Wright Tremaine in the U.S. Needham & Company is acting as financial adviser to ViXS.

 

Further details can be found in Pixelworks' Form 8-K filed with the Securities and Exchange Commission. Additional information about ViXS is available on the company's website.

 

Conference call information

 

Pixelworks and ViXS will host a joint conference call today, May 18, at 5:30 p.m. Eastern Time/2:30 p.m. Pacific Time, to discuss the proposed transaction. The conference call can be accessed by calling 1-877-359-9508 and using passcode 25012334. International callers may join the teleconference by dialling 1-224-357-2393 and entering the same passcode at the prompt. A web broadcast of the call can be accessed by visiting the investor relations section of Pixelworks' website. For those unable to listen to the live web broadcast, a replay will be made available on the website. A replay of the conference call will also be available through May 25, 2017, and can be accessed by calling 1-855-859-2056 and using passcode 25012334.

 

About Pixelworks Inc.

 

Pixelworks creates, develops and markets visual display processing solutions for applications that demand the very-highest-quality images. At design centres around the world, Pixelworks engineers constantly push visual processing performance to keep manufacturers of consumer electronics and professional displays worldwide on the leading edge. The company is headquartered in San Jose, Calif.

 

About ViXS Systems Inc.

 

ViXS is a pioneer and market leader in designing revolutionary media processing semiconductor solutions for video over Internet protocol streaming solutions, with more than 470 patents issued and pending worldwide, numerous industry awards for innovation, and over 33 million media processors shipped to date. ViXS is driving the transition to ultra-HD 4K across the entire content value chain by providing professional and consumer-grade chip sets that support the new high-efficiency video coding (HEVC) standard up to Main 12 profile, reducing bandwidth consumption by 50 per cent while providing the depth of colour and image clarity needed to take advantage of higher-resolution content. ViXS's XCodePro 300 family is ideal for ultra-HD 4K infrastructure equipment, and the XCode 6000 family of system-on-chip (SoC) products achieve unprecedented levels of integration that enable manufacturers to create cost-effective consumer entertainment devices.