TranSwitch Corporation to Acquire Centillium Communications, Inc.
10 July 2008 - 6:52AM
Business Wire
TranSwitch� Corporation (NASDAQ: TXCC), today announced that it has
entered into a definitive agreement to acquire Centillium
Communications, Inc. (�Centillium�) (Nasdaq:CTLM). With this
acquisition, TranSwitch, a leading provider of carrier-class
semiconductor solutions for EoS (Ethernet over SONET/SDH),
Broadband Access and Carrier Ethernet applications, will further
diversify its product portfolio to include rapidly growing
Fiber-to-the-Home (�FTTH�) and Voice-over-Internet-Protocol
(�VoIP�) solutions. The combination strengthens TranSwitch�s
leadership position in the next-generation communications
semiconductor market. The combined companies will have greater
scale, a significantly improved expense structure and a truly
global reach. Management of TranSwitch has identified approximately
$10.5 million of annual expense savings and expects the transaction
to be accretive to earnings in the first full quarter after closing
and significantly accretive in 2009. Under the terms of the
agreement, TranSwitch will issue an aggregate of 25 million shares
of common stock and $15 million, which will be allocated pro rata
among holders of Centillium common stock and vested, in-the-money,
stock options outstanding at the closing of the merger. Based on
Centillium�s capitalization as of July 9, 2009, Centillium
shareholders would receive 0.5958 shares of TranSwitch common stock
and $0.36 in cash for each share of Centillium common stock. Based
on TranSwitch�s closing share price on July 9, 2008, the total
consideration values Centillium at $42.8 million or approximately
$1.02 per share on a fully-diluted basis. Centillium shareholders
will own approximately 16% of the combined company. �We are
delighted to welcome Centillium�s customers, employees and
shareholders to join the TranSwitch team said Dr. Santanu Das, CEO
of TranSwitch. �Centillium has a large number of important
customers including Alcatel-Lucent, OKI, Samsung, ZTE and Tellabs.
Their products have won significant industry recognition, and their
Mustang chip is currently being used in OKI�s ONU platform which is
part of NTT�s EPON based FTTH deployment. We are particularly
excited about Centillium�s second recent design win in the FTTH
platform of a second prominent supplier for this deployment. This
platform is currently being qualified and we anticipate a ramp in
early 2009. The Japanese government has made a major commitment to
rolling out FTTH, and NTT�s goal is to reach 20 million homes by
2010. This represents a major revenue opportunity for the company.�
�This combination further strengthens TranSwitch�s position in the
platforms of Tier-1 equipment suppliers with contracts at carriers
that have made significant financial commitments to upgrade their
current infrastructures. These contracts include carriers in the
UK, Korea, China, India and now Japan,� continued Dr. Santanu Das.
�We believe that as these deployments begin to ramp in volume, the
combined company has the potential to significantly increase its
revenue in 2009. As a larger company, we will enjoy a significantly
better expense structure as well as stronger relationships with
both customers and suppliers.� "We are very pleased to be joining
the TranSwitch team," said Faraj Aalaei, Co-Founder and CEO of
Centillium, who will also serve on TranSwitch�s board upon closing
of the transaction. "Consolidation in the communications industry
is both good and necessary, and the combined company will be
significantly stronger and more profitable than either one by
itself.� �Centillium shares TranSwitch�s culture of strong focus on
product innovation, engineering excellence and best-in-class
customer support. This is evident in the deep customer
relationships both companies enjoy,� concluded Mr. Aalaei. About
the Transaction The boards of directors of both companies have
unanimously approved the transaction which is subject to customary
closing conditions, including the approval of Centillium�s
shareholders. The transaction is expected to close in the fourth
quarter of 2008. Upon completion of the transaction, TranSwitch
will have approximately 158 million fully diluted shares
outstanding, with current TranSwitch shareholders owning
approximately 84% and current Centillium shareholders owning
approximately 16% of the combined company's shares. Thomas Weisel
Partners LLC, Signal Hill Capital Group LLC, and Northland
Securities, Inc. served as financial advisors to TranSwitch.
Pagemill Partners served as financial advisor to Centillium.
Conference Call on July 9, 2008 Management will be hosting a
webcast conference call today, July 9, 2008 at 5:00 p.m. EDT that
will be accessible on the Transwitch�s website under the Investor
Relations and Webcasts section at www.transwitch.com. To listen to
the conference call live by telephone, dial 1-719-955-1425 and
enter access code 730024 approximately ten minutes before the start
time. A telephone playback will be available after the completion
of the call and can be accessed by calling 1-719-884-8882 and using
the access code 730024. A replay of the webcast will be available
for 10 business days. About TranSwitch Corporation TranSwitch
Corporation (Nasdaq: TXCC) designs, develops and markets innovative
semiconductors that provide core functionality and complete
solutions for voice, data and video communications network
equipment. As a leading supplier to telecom, datacom, cable
television and wireless markets, TranSwitch customers include the
major OEMs that serve the worldwide public network, the Internet,
and corporate Wide Area Networks (WANs). TranSwitch devices are
inherently flexible, many incorporating embedded programmable
microcontrollers to rapidly meet customers� new requirements or
evolving network standards by modifying a function via software
instruction. TranSwitch implements global communications standards
in its VLSI solutions and is committed to providing high-quality
products and services. TranSwitch, Shelton, CT, is an ISO 9001:2000
registered company. For more information, visit www.transwitch.com.
About Centillium Communications Inc. Centillium Communications,
Inc. (Nasdaq: CTLM) delivers highly innovative communications
processing technology for global systems vendors targeting service
provider, enterprise and consumer markets. Centillium's high
performance Systems-on-Chip (SoC) products power leading edge
optical, Voice- over-Internet Protocol (VoIP), security and data
systems requiring top quality, highly integrated, very low power
processing solutions that help minimize the energy footprint of
communications networks. With a long heritage of technology
leadership and first-to-market product development, Centillium
provides semiconductor solutions that keep customers and end users
at the forefront of the communications evolution. Centillium is a
global company with headquarters in Fremont, CA. Additional
information is available at http://www.centillium.com. Information
set forth in this communication contains forward-looking
statements, which involve a number of risks and uncertainties. Such
forward-looking statements include, but are not limited to,
statements about the timing of the completion of the transaction,
the anticipated benefits of the transaction, including future
financial and operating results and estimated cost savings and
synergies, and other statements that are not historical facts.
TranSwitch and Centillium caution readers that any forward-looking
information is not a guarantee of future performance and that
actual results could differ materially from those contained in the
forward-looking information due to various risks and uncertainties.
These include risks and uncertainties relating to: the parties�
potential inability to complete the transaction because conditions
to the closing of the transaction may not be satisfied; the risk
that the businesses will not be integrated successfully and without
delay; the risk that the transaction may involve unexpected costs
or unexpected liabilities; uncertainties concerning the effect of
the transaction on relationships with customers, employees and
suppliers of either or both companies; risks associated with
downturns in economic conditions generally and in the
telecommunications and data communications markets and the
semiconductor industry specifically; risks in product development
and market acceptance of and demand for both companies products and
products developed by the companies� customers; risks relating to
TranSwitch's indebtedness; risks of failing to attract and retain
key managerial and technical personnel; risks associated with
foreign sales and high customer concentration; risks associated
with competition and competitive pricing pressures; risks
associated with investing in new businesses; risks of dependence on
third-party VLSI fabrication facilities; risks related to
intellectual property rights and litigation; risks in technology
development and commercialization. The risks included above are not
exhaustive. The annual reports on Form 10-K, the quarterly reports
on Form 10-Q, current reports on Form 8-K, any amendments thereto,
and other documents TranSwitch and Centillium have filed and will
file with the SEC contain additional factors that could impact the
company�s businesses and financial performance. TranSwitch and
Centillium expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any such statements to
reflect any change in expectations or any change in events,
conditions or circumstances on which any such statement is based.
Important Information for Investors and Stockholders TranSwitch
expects to file a SEC Registration Statement on Form S-4, and
TranSwitch and Centillium will file a proxy statement/prospectus
with the SEC, in connection with the proposed merger. TRANSWITCH
AND CENTILLIUM URGE INVESTORS AND STOCKHOLDERS TO READ THE PROXY
STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY OTHER
RELEVANT DOCUMENTS FILED BY EITHER PARTY WITH THE SEC BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION. Investors and stockholders will
be able to obtain the proxy statement/prospectus and other
documents filed with the SEC free of charge at the website
maintained by the SEC at www.sec.gov. In addition, documents filed
with the SEC by TranSwitch will be available free of charge on the
investor relations portion of the TranSwitch website at
www.transwitch.com. Documents filed with the SEC by Centillium will
be available free of charge on the investor relations portion of
the Centillium website at www.centillium.com.
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