IDT is buying PLX in a cash-and-stock transaction valued at 0.525 of an IDT share and $3.50 in cash for each share of PLX in a deal that was announced April 30 and received a request for more information from the FTC on July 6. IDT and PLX certified compliance with that request on Nov. 16 and agreed to allow the agency 45 days to continue its review.
The merger agreement expires Jan. 31. Under the terms of the agreement, IDT or PLX may terminate the deal if regulators challenge it under antitrust law but can also agree to contest the government objection.
IDT, of San Jose, Calif., said in a statement it is disappointed with the FTC's decision to challenge the PLX merger and that it intends to review the complaint and respond appropriately.
PLX, of Sunnyvale, Calif., said it disagreed with the FTC's position and that the merger would accelerate innovation and decrease costs. PLX also noted that it has, during the merger process, streamlined operations to refocus on its PCI Express technology by divesting unprofitable product lines.
Neither IDT nor PLX returned calls.
PCI Express, or peripheral component interconnect express, refers to switch technology that increases the number of data connections in computing systems. PLX is a leading provider of PCI Express followed by IDT, with Pericom Semiconductor Corp. a distant third. The combined companies have an 85% share of the of the $100 million worldwide PCI Express market, but have argued before the FTC that the technology competes with other data center interconnectivity technologies, including InfiniBand, Ethernet and Fibre Channel.
In announcing its challenge, the FTC said the merger would hurt competition and lead to higher switch prices, less innovation in the marketplace, and reduced customer service. The agency claims IDT and PLX are direct competitors and that customers traditionally have used the competition between IDT and PLX to play one company against the other to achieve lower prices, more innovative features and better customer service.
The FTC decided that the combined companies could raise prices for PCI Express switches by 5% to 10% and that, based on internal documents, OEM customers would not as a consequence move to another switching technology.
The FTC vote approving the administrative complaint was supported by four commissioners, with Commissioner Maureen K. Ohlhausen recused.
The risk arbitrage market has viewed the PLX-IDT deal with some trepidation because of the extended FTC review. The deal spread Tuesday was $2.63 and moved out with the FTC opposition to $3.56, or 95%. Shares of PLX fell about 93 cents to $3.70, which is roughly where they traded before the deal announcement. Shares of IDT gained about 25 cents to $7.20.
KeyBanc Capital Markets Inc. took on Walter Oh as a managing director in its healthcare group. For other updates launch today's Movers & shakers slideshow.
To hear more of Jim Cramer′s M&A predictions for 2014 go to www.thedeal.com and sign up to listen to him live on Dec. 5 at the NYSE. More video