TECHNOLOGY : TDK to Buy Tustin Chip Maker
Silicon Systems, a Tustin-based microchip maker, has agreed to be acquired by Japan’s TDK Corp., the world’s largest manufacturer of audio and video tapes, for about $200 million.
TDK, which will pay $20 for each of Silicon Systems’ approximately 10 million shares outstanding, said it plans to invest an additional $200 million in the company’s operations and its research and development division. No major increase in employment is expected, however.
Silicon Systems’ Chairman Carmelo J. Santoro said the acquisition will help it become more competitive. In addition to the infusion of cash, Santoro said, Japanese ownership will enable the company to concentrate on international expansion and provide better access to Far Eastern markets, which currently account for about 25% of Silicon Systems sales.
“It means I can be more concerned with our goal of building a $1.3-billion company by 1998 rather than whether the per-share profit next quarter is going to be 21 cents or 24 cents,” Santoro added.
TDK, on the other hand, will be able to enter the semiconductor market without starting from scratch.
“We’ve been looking at semiconductors for many years. We’re finally going to be making them,” said Ken Aoshima, a vice president of TDK U.S.A., the American subsidiary of TDK Corp., whose operations include an audio tape manufacturing facility in Irvine. “We’re not going to compete with the giants right now. We’ll expand in Silicon Systems’ specialty markets,” Aoshima said.
Silicon Systems’ specialized integrated circuits are used in the computer, telecommunications and automobile industries. Its products are components in, among other things, computer hard-disk memory systems and modems, the devices that allow computers to communicate with each other.
Last year, the company bought a computer microchip manufacturing facility in Santa Cruz from AT&T; Technologies in a move that the firm said would double its production capacity.
Silicon Systems’ stock, which has gained more than 60% since March 31 when the company announced that it was negotiating a possible merger, advanced $1.75 per share Monday, and closed at $19.50 in unusually heavy trading on the New York Stock Exchange. Stock in TDK closed Monday at $62.50 per share, up 25 cents, for the day on the New York Stock Exchange.
Analysts said Monday that TDK’s “very attractive” $20-per-share offer, well above the stock’s trading price in recent months, is unlikely to be followed by competing bids. Silicon Systems’ board approved the merger following a favorable opinion from investment bankers Shearson Lehman Hutton, which was hired to assess the offer for company stockholders.