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Microchip maker Spansion Inc. agreed Monday, Oct. 8, to buy Israeli flash memory developer, Saifun Semiconductors Ltd., for $368 million in stock and cash to expand into technology licensing. The two companies issued a joint statement saying Sunnyvale, Calif.-based Spansion will pay 0.7429 of one of its shares and about $5.05 in cash for each Saifun common share. That values the Israeli target at $368 million, though including Saifun's cash-on-hand the value of the deal falls to $135 million. That values each share in Saifun, which is listed on the Nasdaq, at $11.26, or an 8.5% premium to the closing share price on Friday. However, the takeout price is only about 30% of the stock's record high of almost $38 in January 2006 and about half of the $23.50 initial public offering price in November 2005. Saifun's problems began last October when it announced Qimonda AG, a subsidiary of Germany's Infineon Technologies AG, would reduce the production of memories using Saifun technology. The company's shares immediately plunged as Qimonda had contributed 57% to Saifun's revenue in 2005. In the first quarter of 2007, Saifun's net income fell to $3.3 million, or 10 cents a share, from $10.0 million, or 31 cents a share, a year earlier. Though it has tended to shy away from acquisitions, Spansion is interested in Saifun because it will gain access to intellectual property that is complementary to its MirrorBit technology and allow the company to immediately enter the technology licensing business. What's more, Spansion said the purchase will drive MirrorBit beyond the market for NOR, which is a type of flash memory cell widely used to store code. "Throughout our long-term partnership with Saifun we have been impressed with the depth of technology expertise, the quality of people and the ingenuity of the Saifun organization and look forward to establishing a team in Israel," said Spansion president and chief executive Bertrand Cambou in a statement. Spansion has been a licensee of Saifun's NROM intellectual property since 2002 and has used the application in MirrorBit, which now represents nearly one-fourth of the entire NOR Flash memory segment, and generates revenues at a run rate approaching $2 billion per year. Citigroup Global Markets Inc. provided financial advice to Spansion, which sought legal counsel from O'Melveny & Myers in the U.S. and Yigal Arnon & Co. in Israel. Saifun's financial advisers were Lehman Brothers while its U.S. lawyers were Morrison & Foerster and Israeli counsel was Eitan-Mehulal Law Group. Both boards have approved the deal, and Saifun chief executive Boaz Eitan and his affiliates, who hold about 35% of the company's stock, have agreed to vote in favor of the deal. Once the deal closes, which is expected to be in the first quarter of 2008, current Saifun shareholders will hold about 15% of Spansion's shares.  Deal Video
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