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Electronics test equipment supplier Teradyne Inc. agreed Wednesday, Dec. 12, to buy Nextest Systems Corp., a maker of automatic test equipment for semiconductors, for about $325 million. In a joint statement, the companies said Teradyne will pay $20 per share in cash for Nextest Systems, representing a 67% premium to the closing share price of $11.99 on the Nasdaq stock exchange on Tuesday. North Reading, Mass.-based Teradyne, which specializes in System-On-Chip testing, is buying Nextest for its ability to design and manufacture of flash memory test products. It said the flash memory test segment market was worth about $700 million in 2006 and is growing quickly. Nextest reported 2006 revenue of $95.8 million, of which about $80 million came from flash memory tester sales. "Nextest brings us a solid flash memory test product line, plus a very capable development and technical support organization," said Teradyne president and chief executive Michael Bradley in the statement. "Their growing presence in the flash memory test market provides a strong addition to our System-On-Chip product offerings. This is one of the few business combinations in the test market where customers get products that are so complementary.'' The all-cash sale will complete the exit of the venture companies that backed Nextest in its lone round of VC funding in November 2001. That $20 million round, which priced each Nextest share at $2.50, was led by New York-based venture capital firms Needham & Co. LLC and J.&W. Seligman & Co. The other investors in the round were: Merrill Lynch & Co. and SG Cowen & Co., both of New York; Roser Ventures LLC of Boulder, Colo., also known as the Roser Partnership; and Anthem Venture Partners of Santa Monica, Calif.; and memory developer Atmel Corp. of San Jose, Calif. When San Jose, Calif.-based Nextest held its initial public offering in March, 2006, several of these investors sold stock at $14 a share. Needham, however, retained all its holding and at the end of the offering held 7.1% of the company's shares. The other VC investors held less than 2.5% each, and it is not known if any of the VC backers have changed their positions since the IPO. As of Sept. 29, the target had no long-term debt and $67.7 million in cash on its balance sheet. The company earned $1.8 million in the quarter ending Sept. 29, down from $4.8 million in the three months ending June 30. Teradyne said it expects the deal will slightly dilute 2008 GAAP earnings per share and slightly add to 2008 non-GAAP EPS. The parties expect to close the deal in the first quarter of 2008. Teradyne has been paring down with its product range in the past few years. It agreed to sell its broadband test division in June to Pittsburgh-based Tollgrade Communications Inc. for $12 million plus certain liabilities. In October, 2005, it sold its connection systems division to Amphenol Corp. of Wallingford, Conn., for about $390 million in cash.  Deal Video
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