Under the agreement, National will swap 3.4 million of its common shares for all of Mediamatics, which based on its close of 29-3/8 a share on Friday would price the deal at nearly $100 million. The deal is expected to be completed by the end of the month and the one-time charge will be disclosed at that time, according to Bill Callahan, a National spokesman.
Mediamatics, the world's largest supplier of MPEG audio and video decoders for the PC market, will provide National with the needed compression and decoding capabilities for its home connectivity market.
"We have chips to hand information through cable, telephones, and direct satellites to digital inputs like audio and video displays on the other end, but we don't have the chips in the middle that do the compression and decoding," Callahan said.
As part of the acquisition, National will get a cut of the MPEG-2 DVD business that requires chips.
The deal gives National leverage in the growing market of compression applications. Use of silicon in compression applications is expected to grow to more than $1.9 billion in the year 2000 from $327 million in 1995, according to Dataquest.
During the last two years, National has focused on the home connectivity market. And although it currently comprises a small share of National's overall revenues, it is part of the chipmaker's communications and consumer business, which accounts for a third of National's revenues, Callahan said.