Conexant to Offer Stock in Web Unit; Wants $100 Million
Conexant Systems Inc. hopes to raise $100 million by selling stock in its new Internet equipment unit, according to regulatory documents filed Monday.
Newport Beach-based Conexant, one of the nation’s largest makers of communications chips, said in September that it would sell about 20% of the unit in the initial offering.
The Conexant Spinco division to be spun off makes chips for switches and other gear that runs fiber-optic networks and the Internet. The company that will remain makes chips for devices including mobile phones, modems and video-game consoles.
Conexant Systems, which itself was spun off from Rockwell International Corp. nearly two years ago, hopes to sell shares in the Internet-chip business in January.
The regulatory filing did not say how many shares will be offered and did not estimate a price per share. The company also hasn’t decided which unit will take the Conexant name.
Conexant Systems investors will get one share of the spun-off business for each Conexant share they own, the company said in the filing with the Securities and Exchange Commission. The transaction is conditional on a U.S. government ruling that the spinoff will be tax-free to shareholders, Conexant said previously.
In September, Conexant Systems shares surged 42% after the semiconductor maker said it planned to spin off its fastest- growing division. Merrill Lynch & Co. analyst Joseph Osha said in September the two separate Conexant companies could see their stock values triple as a result of the IPO.
Osha currently rates Conexant Systems at “near-term accumulate.”
In September, the stock jumped by $15.56 a share to $52.63 on the IPO announcement. The increase added about $3.5 billion to the company’s market value and was the stock’s biggest one-day percentage gain. Since then, shares have fallen back about 50%.
The stock rose 44 cents a share Monday to $26.88 in Nasdaq trading.
The IPO filing comes as the Bloomberg IPO index, which tracks the stock of 374 newly public companies, has fallen more than 41% since its peak March 10. The index has fallen about 12% in the past two weeks.
The Nasdaq Telecommunications Index, which tracks the stocks of 243 members, has fallen 57% since March 10. It’s also the worst-performing Nasdaq index so far this year.
For the year ended Sept. 30, the new unit had a net loss of $232.8 million on revenue of $579.2 million. For the previous year, the unit had a net income of $12.4 million on revenue of $277.6 million.
Sales at the division, whose customers include Cisco Systems Inc. and Lucent Technologies Inc., have doubled in each of the past two years. Sales to Cisco amounted to about 15% of the company’s revenue in fiscal year 2000 while sales to Lucent amounted to 12%, the company said in its filing.
The unit plans to use the net proceeds from the IPO to repay an intercompany loan and to pay a dividend to Conexant Systems. Other funds will be used for working capital and general corporate purposes, including potential as-yet-unnamed acquisitions.
Dwight Decker, 50, will be the new company’s chairman, and Raouf Halim, 40, will be Conexant Spinco’s chief executive. Decker is the chairman and chief executive of Conexant Systems and will retain those positions. Halim is a former vice president at Conexant Systems.
Credit Suisse First Boston and Morgan Stanley Dean Witter will underwrite the stock sale. The company will trade on the Nasdaq National Market under an undisclosed stock ticker.
