Texas Instruments, Amati to merge

Amati Communications is swept off its feet by Texas Instruments in a multimillion-dollar merger deal that halts its pending acquisition by Westell Technologies.

3 min read
Amati Communications (AMTX) was swept off its feet by Texas Instruments (TXN) today in a multimillion-dollar merger deal that halted its pending acquisition by Westell Technologies (WSTL).

The TI agreement provides for an all-cash tender offer for all outstanding shares of Amati's common stock at $20 per share, or $395 million.

That is just $1 million more than the deal with Westell, in which each share of Amati would have been exchanged for 9/10 of a share of Westell?s common stock.

The deal does not push Westell out into the rain, however. Rather, it brings Westell in to work in conjunction with TI and Amati.

TI and Westell today announced that they have entered into a strategic technology development agreement in an effort to accelerate the use of TI's DSP-based xDSL technologies in Westell's DSL systems. The arrangement is contingent, however, on the consummation of TI's acquisition of Amati.

Kim Quirk, a spokeswoman for TI, said the goal of the three-way deal is to deliver broadband multimedia services, such as high-speed Internet access and real-time video, over regular telephone lines.

The companies hope that the relationship between Westell modem technology, TI's chipset and digital signal processing technology, and Amati's discreet multitone software will allow multiple multimedia services on the same line, allowing users to, for example, receive a fax, connect to the Internet, and talk on the telephone through the same, single phone line--a line that should transmit information 200 times faster than current phone line capabilities.

The technology is expected to be available to the general pubic in 1999 or 2000, said Quirk. She added that all Atati employees will be hired by Texas Instruments. "The strength of Amati is in their employees," she said.

Amati's stock gained nearly 30 percent on the news, pushing it to as high as 19-13/16, up from yesterday's close of 15-3/16. Volume surpassed its 52-week high, with over 4.2 million shares trading hands by 11 a.m. PT--nearly 8 times the stock's average daily volume.

As a result of the pending deal, TI expects to take a one-time charge in the fourth quarter for in-process research and development. Once the deal is approved, Amati will become a wholly owned subsidiary of TI reporting to the semiconductor group, and will continue to operate from its facilities in San Jose.

Amati, which has approximately 120 employees, had fiscal-year sales of $13.2 million for 1997. The telecom company terminated its merger agreement with Westell in order to enter into the definitive agreement with TI, a move that will require the payment of a $14.8 million break-up fee to Westell.

Amati and TI started working together in October 1996 to develop technology for high-speed ADSL (asymmetric digital subscriber line) connections.

TI said it wanted to combine its TMS320 digital signal processors with discrete multitone technology from Amati, which claims to provide even higher speeds than ADSL currently provides, in real-world conditions.

The result, the companies said, was to design ADSL modems, based on Amati technology, at a lower cost and with more features. Ethernet and ATM (asynchronous transfer mode) access are among the other features that the companies are looking to integrate into future products.