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August 28, 2000
Applied Micro Will Purchase
MMC for $4.5 Billion in Stock
By NIKHIL DEOGUN and DON CLARK
Staff Reporters of THE WALL STREET JOURNAL
Applied Micro Circuits Corp. agreed to acquire MMC Networks
Inc. for $4.5 billion in stock in a deal that unites two leading
technology suppliers in the red-hot optical networking segment.
Both boards have approved the transaction, which may be one of
the biggest deals in the semiconductor-components business.
Under terms of the deal, Applied Micro, known as AMCC, will
offer 0.619 of a share of its stock for each share of MMC. At 4
p.m. Friday in Nasdaq Stock Market trading, shares of AMCC
closed down $1.38 to $188.56, while MMC slipped $1.06 to
$78.25. Based on Friday's close, Applied Micro is paying
$116.72 a share for one MMC share, or a 49% premium to
MMC's market price.
Despite the significant premium, the transaction will be
"nondilutive," said Dave Rickey, AMCC's chief executive.
AMCC, a San Diego company founded in 1979, originally
specialized in military circuitry but more recently has focused on
high-speed chips used in optical networking equipment. The
company sells products to companies such as Juniper Networks
Inc., Cisco Systems Inc. and Nortel Networks Corp.
MMC, a Sunnyvale, Calif., company whose name originally stood
for Multimedia Communications, was founded in 1993. It sells
specialized chips known as networking processors that carry out
different functions in some of the same kind of networking gear,
sometimes made by the same customers. The two companies
went public within a month of each other in the fall of 1997. "When
you put all of our products [together] you get a complete solution,"
Mr. Rickey said, noting that the two companies, while serving
similar customers, offer complementary products.
Both companies have been highfliers, with AMCC's stock rising
199% this year, while MMC's has risen 130%. MMC stock
rebounded this year after trading as low $16.38 a share last
November. Indeed, one reason why AMCC may be paying a
sizable premium is because MMC's business is starting to
perform strongly. "MMC was not compelled to sell," said Mr.
Rickey.
Citigroup Inc.'s Salomon Smith Barney unit advised Applied
Micro, while Credit Suisse Group's Credit Suisse First Boston
unit advised MMC Networks.
Write to Nikhil Deogun at nik.deogun@wsj.com and Don Clark at
don.clark@wsj.com |
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