Mindspeed subsumes PicoChip, expands to cellular market

Mindspeed Technologies Inc. has subsumed PicoChip Ltd, a provider of chipsets for cellular communications including femtocell base stations, for $51.8 million. The cost to the fabless networking chip company could go up by $25 million due to an 'earn-out' clause on the achievement of certain unspecified milestones, payable in 1Q13.

The deal as currently structured is based on a mixture of $27.5 million in cash and 5.19 million new shares of Mindspeed common stock.

The deal will create an enlarged Mindspeed with a 70 percent market share in 3G/HSPA small cell base station market and a good pipeline in LTE small cell market, Mindspeed revealed. However, the deal would appear to represent a damage limitation exercise for venture capital investors in PicoChip.

PicoChip was founded in 2000 and applied a highly parallel DSP approach to base station standards implementation. Since then the company is thought to have received more than $100 million from venture capital firms and strategic investors. These include Atlas Venture, Highland Capital Partners, Pond Venture Partners, The Rothschild Group, Scottish Equity Partners, AT&T, Intel Corp. and Intel Capital and Samsung Ventures America. The company raised about $20 million in series E round of finance announced in June 2010.

The deal has been approved by both boards of directors and is expected to close in the 1Q12, subject to customary and other closing conditions.

- Peter Clarke
??EE Times