MaxLinear, a designer of connectivity and infrastructure solutions for broadband, connectivity, and infrastructure applications, on Thursday said that it had reached a definitive agreement to acquire Silicon Motion (SMI), a developer of SSD controllers and turn-key solid-state drives. The transaction greatly enhances MaxLinear's product portfolio with a line-up of competitive SSD controllers and a successful team of engineers.
"Combining Silicon Motion with MaxLinear creates significant economies of scale, accelerates our expansion into enterprise storage markets and unites unparalleled intellectual property to continue serving our customers with high-quality expertise and technical support," said Wallace Kou, President and CEO of Silicon Motion.
In fact, the merger is highly complementary as most designers of networking and infrastructure chips do not have storage controllers, whereas developers of SSD controllers do not sell networking or infrastructure ICs. MaxLinear believes that the takeover expands its total addressable market to around $15 billion.
"The enhanced scale of the combined organization creates a new significant $2B+ player in the semiconductor industry with compelling positions across a diversified set of end-markets," said Kishore Seendripu, Ph.D., Chairman and CEO of MaxLinear.
It is noteworthy that MaxLinear was not the only company which considered buying Silicon Motion. Earlier today Bloomberg reported citing people familiar with the matter that MediaTek, a developer of system-on-chips for smartphones, tablets, PCs, and consumer electronics, was also interested in SMI.
MaxLinear will acquire Silicon Motion in a cash and stock transaction. Under the terms of the agreement, each owner of American Depositary Share (ADS) of Silicon Motion will get $93.54 in cash and 0.388 shares of MaxLinear common stock (valued at $44.36, based on $114.34 per MXL share as of May 4, 2022 closing price), which represents a premium of 48% over Silicon Motion's market value as of April 22, 2022. In total, MaxLinear values Silicon Motion at $3.8 billion. It estimates that the combined company will feature an enterprise value of $8 billion. The transaction is expected to close in 18 months.
The $3.1 billion of cash consideration will be funded with cash on hand from the combined companies and fully committed debt financing from Wells Fargo Bank.
MaxLinear develops and sells chips used for home and enterprise Ethernet networks, datacenter, broadband, home, and industrial applications. The acquisition of Silicon Motion greatly expands MaxLinear's competitive advantages over datacenter rivals in general and makes it significantly more competitive with Marvell in particular. The latter is renowned for its client and enterprise -oriented HDD as well as SSD controllers and while SMI is competitive in the client space, it is only starting its journey on the enterprise market.
Solid-state storage is one of the key ingredients of next-generation datacenters and personal electronics. Developing a proper SSD controller for future types of 3D NAND (QLC, PLC, HLC, 600+ layers, high-speed interfaces, etc.) is a major challenge, so acquiring an SSD developer (whether an established player or a start-up) is one of the ways to ensure that your platforms are competitive several years down the road. Meanwhile, taking over a reputable designer of SSD controllers is a relatively easy way of getting a steady revenue stream and enhance product portfolio with offerings that are in high demand.