Broadcom Corp. (Nasdaq: BRCM) said Tuesday it will snap up Israeli-based VisionTech Ltd., a supplier of digital video/audio MPEG-2 compression and decompression chips for 7.96 million shares, or about $776 million based on Monday's closing price.
The move will establish Broadcom in the market for Personal Video Recording (PVR), and be the first development in Broadcom, Israel.
Shares in Broadcom closed down 19.63 to 97.56 Monday. The stock's decline sharpened after a downgrade in November.
VisionTech's chips enable PVR, as well as interactive videoconferencing, and Internet Protocol (IP) video streaming. Customers of its latest MPEG-2 video/audio encoder chip, Kfir-2, include Motorola's (NYSE: MOT) Broadband Communications Sector, Scientific-Atlanta (NYSE: SFA), Pace, Microsoft (Nasdaq: MSFT) WebTV, as well as PVR pioneer Replay TV.
PVR unit shipments are expected to grow significantly over the next few years, according to Cahners In-Stat. Between 2001 and 2003, unit shipments of PVR-enabled set-top boxes are expected to increase approximately 275 percent each year.
Following the acquisition, VisionTech will form the core of Broadcom Israel, a new subsidiary which will continue to develop chips that enable MPEG compression, and evaluate other new technologies from start-up companies in the region.
Broadcom will issue about 7.96 million Class A shares in exchange for all of the assets of VisionTech. The deal includes Broadcom Class A stock reserved for future grants to customers upon the exercise of outstanding performance-based warrants of VisionTech.
Broadcom said it expects to record a one-time charge for purchased in-process research and development expenses related to the acquisition, but did not specify an amount.
The merger transaction is expected to close within 60 days and will be accounted for under the purchase method of accounting.
• Broadcom, communications chip stocks hit by downgrade
• Broadcom comfortable with estimates>