SiRF, King of GPS Chips, Acquired By Multifunction Chip Maker CSR: Is Standalone GPS Dying?

SiRF, King of GPS Chips, Acquired By Multifunction Chip Maker CSR: Is Standalone GPS Dying?

CSR Who? CSR specialises in Bluetooth and multiple connection options on a single chip. Maybe this makes sense because connected, location-aware phones like the Android and iPhone and Nuvifone are killing the standalone GPS.

They’re doing it to get bigger and badder as a single fabless semiconductor company that designs, but does not make, their chips. But what I’m feeling is a single-chip solution for Bluetooth and GPS, if not Wi-Fi and all the other flavors. One mobile chip to rule them all, possibly. Or at least one less extra chip in your phone/mobile thingy. If that leads to smaller, cheaper gadgets, I’m all for it.


Transaction Valued at $2.06 Per Share Representing a 91% Premium to SiRF Stockholders

SAN JOSE, Calif. – February 9, 2009 – SiRF Technology Holdings, Inc.
(NASDAQ: SIRF), a leading provider of GPS-enabled silicon and premium software location platforms, today announced a definitive agreement under which SiRF and CSR plc (LSE: CSR) will merge in a stock-for-stock transaction to create a global leader in connectivity and location platforms. The Boards of Directors of both companies have unanimously approved the transaction, which is expected to close in the second quarter of 2009.

CSR is a global leader in the Bluetooth connectivity business with core expertise in multiple connectivity technologies, while SiRF is a leader in the GPS location business with core expertise in GNSS and multifunction system-on-chip (SoC) location platforms. This strategic combination of market leaders will create a global company with significant commercial, operational and technical scale, uniquely positioned to capitalise on the large and growing multifunction consumer electronics market opportunity for connectivity and location technologies. Based on CSR’s and SiRF’s results for fiscal year 2008, on a pro forma basis, the combined companies would have had sales of approximately $927 million. The combination will create the single largest pure play provider of integrated connectivity and location platforms and will be one of the top 10 fabless semiconductor companies in the world. Customers of the combined company include four of the top five handset manufacturers, the top five personal navigation device makers, the top two auto-telematics suppliers, and other leading auto and consumer electronics providers. CSR and SiRF will have design and customer support centres located around the world.

Under the terms of the agreement, SiRF stockholders will receive 0.741 of a CSR share for each share of SiRF common stock they own. Based on the closing stock price for CSR on February 9, 2009, this consideration would be equivalent to $2.06 of CSR stock for each SiRF share, representing total consideration of $136 million. This represents a premium to SiRF stockholders of approximately 91% over SiRF’s closing stock price on February 9, 2009. Upon closing of the transaction, SiRF stockholders are expected to own approximately 27% and CSR shareholders are expected to own approximately 73% of the combined company. The transaction is expected to be tax-free for SiRF stockholders.

Dado P. Banatao, Executive Chairman of the Board and Interim CEO of SiRF, said, “This transaction unites two market and technology leaders in their respective fields who together will be able to deliver a broad portfolio of innovative products that are critical to the rapid evolution of consumer electronics, mobile phones, mobile computers and automotive devices. Our market opportunity is being driven by growing consumer demand for greater functionality. Our ability to offer customers both leading edge location and connectivity technologies will be a key competitive advantage. Together with CSR, we can accelerate our strategic plans, realise growth opportunities faster than either company could on its own, diversify our revenues and capitalise on market opportunities to create value for shareholders.”

Commenting on the merger, Joep van Beurden, CEO of CSR, said, “Financially, strategically and commercially, this is a compelling transaction. We expect it to be significantly accretive, to enhance the enlarged group’s financial strength and cash position and to create new and wider revenue opportunities that neither party on its own could pursue as effectively. Strategically, this deal considerably strengthens our leadership position in the Connectivity Centre, a strategy which we believe encapsulates the way our marketplace is developing.

Commercially, there is a powerful, complementary fit between the technologies, skill sets and customer relationships of both companies and the way we both see our customers’ needs evolving. Together we create a group substantially better placed both to meet the challenges of today and to emerge even stronger from the current testing market conditions.”

Kanwar Chadha, SiRF’s founder, Board member and Vice President of Marketing, said, “This merger unites two companies with a shared market vision and equally strong commitments to innovation, customers, shareholders and employees. CSR is the right partner to create additional growth opportunities for our company, and we believe that both our companies will benefit significantly by being part of a larger, dynamic and growing organisation. Both companies have successfully competed against much larger companies in their respective fields, and we believe that this transaction, which combines our innovative technologies, will significantly enhance competition in the marketplace.

We will take advantage of the strengths of each company to take our business to the next level, and we look forward to working with the CSR team to ensure an effective and seamless transition.”

Benefits of the Transaction

* Combined Product Roadmap Offers Compelling Next Generation
Solutions. The combined company will have significant R&D resources to deliver a broader portfolio of innovative location and connectivity solutions to customers. SiRF’s and CSR’s respective teams of industry-leading experts will drive innovation, including the ability to meet the significant customer demand for high performance location and connectivity features on smaller, lower power chips. R&D efforts will continue to support each company’s existing product lines and will also be focused on the delivery of additional multifunction radio chips, which combine CSR’s Bluetooth and other connectivity capabilities with SiRF’s GPS and GNSS technologies.

* Enhanced Ability to Capture Growing Market Opportunities and Create Significant Revenue Synergies. Combined, SiRF and CSR will be well-positioned to capitalise on the large and growing market opportunities for each company’s product offerings. The combined company will benefit from significantly increased scale to meet the demand for both connectivity and location services in a broad range of products spanning mobile phones, automobiles, personal computers, mobile internet devices, digital cameras, mobile gaming and other consumer electronics products. Furthermore, the companies expect to achieve significant additional revenue synergies beginning in 2010 and beyond through a combination of cross-selling opportunities, deeper penetration of existing customers, new product offerings combining complementary technologies and access to new markets.

* Combination Delivers Significant Financial Synergies. The companies expect a combination of CSR and SiRF will deliver significant cost savings from gross margin improvements and reduced R&D, sales and marketing and overhead costs. The companies expect that annual cost synergies of at least $35 million can be achieved through steps that can be implemented within 60 days post completion of this transaction.

* Enhances Financial Strength and Flexibility. The combined company is expected to have a strong balance sheet and cash position.
At the end of fiscal year 2008, on a pro forma basis, the combined company had $378 million in cash and no bank debt.

Following the close of the transaction, CSR’s Board of Directors will be expanded to add two members of the SiRF Board, Messrs. Banatao and Chadha. Mr. van Beurden will lead the combined company as Chi
ef Executive Officer with the remaining leadership to be comprised of executives from both SiRF and CSR. The combined company will be headquartered in Cambridge (United Kingdom), and SiRF’s San Jose, California headquarters will become the headquarters for CSR’s U.S.

The transaction is subject to regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, SEC registration of CSR’s shares and other customary closing conditions. The transaction is also subject to the approval of SiRF and CSR shareholders.

CSR is currently listed on the London Stock Exchange. Upon closing of the transaction, CSR will provide a facility to enable U.S. shareholders to trade their shares.

Goldman, Sachs & Co. and Simpson Thacher & Bartlett LLP acted as financial advisor and legal counsel for SiRF, respectively.