Newport Beach, Calif.-based Mindspeed said it would pay $51.8 million for the privately held target, plus a potential earnout payment of up to $25 million payable in the first quarter of 2013.

The payment at closing will be composed of $27.5 million in cash and about 5.19 million new shares of Mindspeed common stock, which amounts to about 15% of the buyer's outstanding stock. The cash portion will be financed partly with bank debt, Mindspeed said. The earnout will be payable in cash, common stock or a combination of both.

Bath, U.K.-based Picochip makes systems-on-a-chip for small cell base stations, often referred to as femtocells, which connect cell phones to a service provider's network via a broadband connection, often in a residence or office were signals can be weakened. The company, founded in 2000, has received investments from AT&T Inc., Atlas Venture, Highland Capital Partners, Intel Capital, Pond Venture Partners, Rothschild, Samsung Group and Scottish Equity Partners.

For financial advice, Mindspeed hired Raymond James & Associates Inc.; for legal advice it retained Wilson Sonsini Goodrich & Rosati. Picochip turned to Barclays Capital for financial advice and Fenwick & West LLP for outside counsel.