Tessera Technologies (TSRA) to Acquire DTS (DTSI) for $850M

September 20, 2016 7:01 AM EDT

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Tessera Technologies, Inc. (NASDAQ: TSRA) and DTS, Inc., (NASDAQ: DTSI) announced that they have entered into a definitive agreement under which Tessera will acquire DTS for $42.50 per share, representing a 28% premium to DTS’s 30-day volume weighted average price as of September 19, 2016. The all-cash transaction is valued at approximately $850 million.

The transaction will combine market leading audio and imaging innovators with complementary products, technologies, customer channels and intellectual property assets to enable the creation of an expanded, integrated platform to invent the future of smart sight and sound. Upon completion of the acquisition, the combined company will be one of the world’s leading product and technology licensing companies, with over 450 engineers focused on developing next-generation imaging, audio and semiconductor packaging technologies. In addition, the acquisition adds significant scale and diversifies revenue across end markets and customers. The combined company is forecasted to achieve pro forma 2016 revenue of approximately $450 million, nearly half of which will come from product licensing.

The transaction will be immediately accretive to Tessera’s earnings per share and free cash flow. The combined company is expected to realize $15 million in annualized cost synergies within the first 12-18 months following the closing of the transaction and anticipates revenue synergies from the expansion of addressable markets and leveraging of complementary customer channels and technologies. Tessera intends to fund the acquisition with a combination of available cash on hand and approximately $600 million of committed debt financing from RBC Capital Markets. The combined company will maintain a strong balance sheet with pro forma cash and investments of approximately $100 million. The combined company is expected to generate significant free cash flow that will provide flexibility to retire debt, fund quarterly dividends, explore M&A opportunities, and continue investments into its business units. In order to better reflect the combined company’s capabilities and technologies, a new corporate name and stock symbol will be adopted in connection with the closing of the transaction.

“Our acquisition of DTS’s talented team and industry-leading products will represent a transformational step in the execution of Tessera’s strategic vision, with exciting new product development and marketing opportunities. We expect this acquisition to be immediately accretive to Tessera’s earnings and accelerate growth. Our complementary technology portfolios are ideally suited to deliver the next generation of audio and imaging solutions to mobile, consumer electronics, and automotive markets while expanding our ability to address incredible new opportunities in IoT and AR/VR,” said Tom Lacey, Tessera CEO. “I am particularly excited that Jon Kirchner and the exceptional DTS team will join the Tessera family as we continue to grow and expand the DTS brand.”

“This is an exciting transaction that provides substantial and immediate value to our shareholders. We look forward to working closely with Tom and the Tessera team to achieve a smooth integration and pursuing the attractive opportunities ahead,” said Jon Kirchner, chairman and CEO of DTS. “We believe that as part of Tessera we will be in a unique position to deliver the world’s leading audio and imaging solutions to all of our key markets and drive meaningful value for our combined customers, partners and employees.”

Combined company profile:

  • DTS’s innovative audio solutions include, among others, DTS-HD® and DTS:X™ audio codecs, DTS Headphone:X® and DTS Sound™ pre-and post processing solutions , DTS Play-Fi® wireless audio, and HD Radio™
  • Tessera’s world-class FotoNation®, Invensas and intellectual property businesses, which have developed and licensed technologies that ship globally in billions of devices
  • A major technology presence in the consumer electronics, mobile, automotive and semiconductor markets
  • A superior R&D team made up of over 450 imaging, audio and semiconductor packaging engineers
  • Significant sales channel leverage with immediate mobile and automotive customer cross-selling opportunities
  • At the closing of the transaction, Lacey will continue to serve as CEO and Kirchner is expected to join as President of the combined company.

Transaction Structure and Terms

Under the terms of the definitive agreement, Tessera will acquire DTS in an all cash transaction valued at approximately $850 million. DTS equity awards will be assumed or exchanged for cash upon closing of the transaction, in accordance with the terms of the definitive agreement. DTS stockholders will become entitled to receive $42.50 per share in cash at the time of the closing. Additionally, all of DTS’s outstanding debt will be retired at the closing of the transaction.

The transaction has been unanimously approved by both companies’ respective Boards of Directors. Closing of the transaction is expected by late fourth quarter of 2016 or early first quarter of 2017, and is subject to regulatory approval as well as the approval of DTS’s stockholders and other customary closing conditions.


GCA acted as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Tessera; Centerview acted as financial advisor and DLA Piper LLP acted as legal advisor to DTS.

Conference Call

Tessera’s management will discuss the proposed transaction with analysts and investors on a conference call today at 8:30 a.m. Eastern (5:30 a.m. Pacific).

To access the conference call:

Participant Toll-Free Dial-In Number:


Participant International Dial-In Number:


Conference ID:


All participants should dial in approximately 10 minutes prior to the start of the conference call. A live webcast will be available on the company’s website at www.tessera.com. Here is the link for today’s webcast: Tessera webcast.

Upon publication and filing of the conference call transcript, a replay of the call will be available via telephone for two days by dialing (855) 859-2056 or (404) 537-3406, and using the conference ID referenced above. At the same time a replay of the webcast will be available for 90 days on the Investors section of the company’s website at www.tessera.com.

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