It's just as well that there's a Cambridge in the US (next door to Boston, Massachusetts), it'll save on re-printing costs for business cards as another UK Cambridge tech company is swept up by a cash-rich American buyer. Today's 900p per share deal from Qualcomm (QCOM:NDQ) for UK bluetooth and wireless connectivity microchips designer CSR (CSR) came right out of left-field.
It implies that flagged negotiations with Microchip Technology (MCHP:NDQ) that have been going on for weeks were not exclusive, and perhaps CSR was able to conduct a sort of beauty parade of potential buyers. If so, well done Joep van Beurden (read Shares interview) and his team, the CSR chief executive office (CEO) has extracted a pretty full price at £1.56 billion. For context, that's an extra 12.5% compared to CSR's record 806.5p share price hit in March this year, but a massive 56.5% premium to the 575p share price before buyout talks were revealed 27 August.
The City's tech experts have been caught out by this bolt from the blue deal (it wasn't just me). 'This is a surprise, as Microchip Technology was expected to be the acquirer,' honestly admitted finnCap's tech analyst Lorne Daniel this morning. Other analysts are not so forthcoming in admitting their shock.
But what all seem to agree on is that the price is right. 'The price looks fair to us and in-line with our thoughts following reports of initial bid interest in CSR,' says Numis' Nick James. 'We see this as a good offer to the shareholders and expect it to be accepted,' says finnCap's Daniel.
We estimate a valuation of 16.8-times 2014 earnings before interest, tax, depreciation and amortisation (EBITDA) versus Qualcomm’s own 9.9-times,' calculates Megabuyte's Philip Carse. 'CSR will add about 3% to revenues.'
But the deal isn't done and dusted yet. As Numis' James points out, 'the main conditions to the transaction are shareholder approval, regulatory approval and anti-trust clearance.' That last bit may sends shivers down the spines of shareholders, but it needn't. CSR's automotive, indoor location, health and wider Internet of Things (IoT) connectivity expertise provides limited crossover to Qualcomm's core mobile devices space.
But sadly, this is another home-grown, Cambridge-based technology growth company destined for US ownership. Shares has been long-run supporters of the company and have written about it's bright prospects several times this year alone (in April, then in May, again in July, and twice in August).
It's great that Britain has such expertise within its ranks but galling that we often do not seem to have the ingredients to create global technology giants, ARM (ARM) the arguable one standout. Interestingly, Hertfordshire-based Imagination Technologies (IMG) may be among the chief beneficiaries as CSR shareholders hunt for a home for their CSR profits. It's shares are up about 4.5% today at 186p.
