DUBLIN, Ireland — Microchip maker Parthus Technologies PLC of Ireland said Friday it plans to merge with Ceva Inc., a division of an American-Israeli technology concern DSP Group.
The new company, ParthusCeva Inc., would combine the two companies’ skills in designing chips and software for mobile Internet communications, a field of great potential but elusive profit in recent years.
The combined company would supply products, chiefly for Internet-capable mobile phones and handheld computers, to nine of the world’s top 10 computer chip makers.
One of DSP’s specialties is speech compression software, which allows telephone and computer users to have their voice converted into text or execute other functions over wireless Internet connections.
In what both partners describe as a merger of equals, DSP shareholders would hold a 50.1 percent stake in the new firm. Parthus shareholders would have the remaining 49.9 percent.
Their marginally different ownership shares are a result of U.S. tax laws. DSP needs a nominal majority stake so that it can spin off Ceva on a tax-free basis before the merger, said Barry Nolan, a Parthus vice president for marketing. Shareholders would be issued new shares in ParthusCeva in exchange for their existing shares.
To equalize the respective market capitalizations of Parthus and Ceva, Parthus shareholders also would receive a one-time payment of $60 million, Nolan said.
The merger requires regulatory approval in Ireland and the United States and approval from Parthus shareholders, but is expected to be completed in July.
In early trading on the Nasdaq Stock Market, Parthus shares were down 5.4 percent, or 35 cents a share, at $6.15 while DSP shares gained 2.5 percent, 50 cents a share, to $20.50.
DSP has headquarters in Santa Clara, Calif, and a design center in Herzelia, Israel.
Parthus said the merged firm would open new headquarters in San Jose, Calif., near the current Ceva base, while most management would remain in Dublin. It would employ more than 400 people worldwide, chiefly in research and development. Its shares would be listed on the Nasdaq and in London.
DSP Group chairman and chief executive Eli Alayon would become chairman of ParthusCeva and Parthus president Kevin Fielding its chief executive. The merged company’s board of directors would be split evenly with four members from each partner.
Parthus has been losing money since 1999, in line with the cooling of the entire high-tech sector and growing indebtedness of mobile phone firms.
In its full-year 2001 results released in January, Parthus reported it lost $34.7 million on sales of $40.9 million, versus a loss of $16 million on revenue of $31.9 million in 2000.
Parthus said it expected to break even this year and, following the merger, forecast revenue in 2003 of around $80 million.
“This combined company will have a strong revenue growth and be profitable,” predicted Parthus chief executive Brian Long, who would become vice chairman of ParthusCeva.
He said the new firm would command “a very dominant position in terms of customer base.”
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