Sigma Designs (SIGM) to Sell its Z-Wave Business for $240 Million

January 23, 2018 4:24 PM EST
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Sigma Designs, Inc.® (NASDAQ: SIGM) today announced that due to the initial closing conditions in the previously announced definitive agreement with Silicon Labs (NASDAQ: SLAB) for the acquisition of the entirety of Sigma Designs not being satisfied, the parties will move forward with the sale of Sigma’s Z-Wave business to Silicon Labs for $240 million in an asset transaction, pursuant to the terms of the definitive agreement and contingent upon approval by Sigma Designs’ shareholders.

Contingent upon such shareholder approval, Sigma Designs expects that the asset transaction would close in either the late first or early second calendar quarter of 2018. Sigma Designs has material U.S. and international tax attributes that it believes would significantly reduce the taxes otherwise payable with respect to the asset transaction.

Sigma Designs intends to initiate a plan of liquidation following the closing of the asset transaction, which plan is currently anticipated to include a substantial initial cash distribution to shareholders. Sigma Designs intends to work with its advisors to confirm its plan of liquidation and will provide additional information to shareholders as it becomes available. The board of directors expects, subject to uncertainties inherent in the winding up of its business, to make an initial distribution following the Z-Wave asset sale and initiation of the plan of liquidation and a final liquidating distribution as promptly as practicable after payment of, or provision for, outstanding claims. No assurances can be made as to the ultimate amounts to be distributed or the timing of any distributions.

“We conducted an extensive and thorough review process over several months, and are pleased to have achieved what we believe is a positive outcome for our shareholders,” said Thinh Tran, Chief Executive Officer of Sigma Designs, Inc. “While Sigma Designs has built a strong Z-Wave business and established itself as a leader in the home automation market, it became increasingly apparent that the significant investment needed to maintain our strong position would have been challenging against much larger competitors in a consolidating semiconductor industry.

“With the initial closing conditions for the sale of the entire company not met, our definitive agreement with Silicon Labs reverts to the asset sale of the Z-Wave business, which not only enables us to capture the value of the Z-Wave business, it also provides our shareholders certainty of value,” said Mr. Tran.

Sigma Designs is exploring alternatives to increase the available cash for distribution to shareholders through divestment of additional businesses, including its Home Connectivity business, its Mobile IoT business, remaining assets of its Smart TV and Set-top Box businesses and other assets. Sigma is currently in active conversations regarding the divestment of additional businesses and assets.

Sigma already has initiated certain actions to preserve the amount of cash available to shareholders, including a wind-down process for its Smart TV and Set-top Box business to reduce such business’ workforce from 416 to 120 employees. Sigma Designs intends to wind down or divest its remaining businesses over the next 12 months, but exact timing will depend on a variety of factors.

Deutsche Bank is serving as financial advisor to Sigma Designs.

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