CSR plc and Zoran Corporation agree to revised terms for proposed transaction creating a global leader in connectivity, location, imaging and audio
London, 17 June 2011 -- CSR plc (LSE: CSR.L, CSR) and Zoran Corporation (NASDAQ: ZRAN,Zoran) today announced that the Boards of Directors of CSR and Zoran have approved amendments to the terms for CSRs proposed merger with Zoran (the Transaction) previously announced on 21 February 2011. In addition, CSR and Zoran have today announced that they are confirming previous revenue guidance for Q2 2011 contained in their respective Q1 2011 results released on 10 and 9 May 2011.
Since the Transaction was originally announced on 21 February 2011, several developments have impacted the near-term outlook of Zoran, including the earthquake and tsunami in Japan and the recent announcement by Cisco Systems that it will exit its Flip digital video camera product line. These and other events negatively impacted Zorans expectations for its second quarter financial results, as discussed in Zorans 9 May 2011 announcement. Accordingly, CSR and Zoran have entered into an Amended and Restated Agreement and Plan of Merger that provides for revised terms for the Transaction (the Revised Terms).
· Under the Revised Terms, Zoran shareholders will receive US$6.26 in cash and 0.589 ordinary shares of CSR in the form of American Depositary Shares (each an ADS, and each ADS representing four ordinary shares) for each share of Zoran common stock held;
· As at close on 16 June 2011, this represents a value of US$9.19 per share of Zoran common stock or a total consideration of approximately US$484 million1 (the Transaction Value);
· Net of Zorans cash balance of US$251 million as at 31 March 2011, the Transaction Value implies an enterprise value of US$233 million;
· The cash consideration of US$313 million will be satisfied from the combined groups existing cash resources;
· Following completion, Zoran shareholders will own approximately 16.5% of the combined group on a fully diluted basis1 as of 16 June 2011; and
· CSR will no longer proceed with its on-market share buyback programme announced on 21 February 2011 as part of the original transaction.
CSR and Zoran remain convinced of the strong strategic rationale of the Transaction and expect the combination will:
- Strengthen CSRs core business by adding imaging and video capabilities within its existing end markets;
- Create new growth opportunities within global electronics markets such as internet-enabled, location-aware digital cameras, enhanced video and imaging capable automotive infotainment platforms and the next generation of home entertainment products and peripherals;
- Accelerate CSRs strategic shift into higher margin platforms and integrated solutions; and
- Provide a step change in CSRs total scale and addressable market.
- In addition, CSR believes the financial rationale of the combination is highly attractive to shareholders, as the Transaction:
- Expands the combined revenue base by customer, technology and market;
- Is expected to generate run rate cost synergies of US$50 million, across the combined group, by the end of Q1 2012, whilst continuing investment in the combined technology pipeline. US$35 million of synergies are expected from a reduction in operating expenditures and US$15 million from cost of goods sold;
- Is expected to achieve an additional US$20 million of identified rightsizing savings which are expected to be achievable by the end of Q1 2012 based upon extensive integration planning;
- Benefits from an additional US$30 million of cost reductions already undertaken by Zoran. When these reductions are combined with the rightsizing and operating expenditure cost synergies, the net increase in CSRs run rate operating costs compared to CSR on a standalone basis is expected to be approximately US$175 million (vs. the Q1 2011 Zoran run rate of approximately US$260 million) by the end of Q1 2012. One-off restructuring and integration costs are estimated to be US$50 million; and
- Is expected to provide more than 15% EPS accretion in 2012 before any incremental revenue synergies and one-off costs, after taking into account the ongoing cost savings at Zoran, and the full run rate of expected cost synergies and rightsizing2 .
1 Based on the closing price of 308.1 pence per CSR ordinary share and the closing price of US$7.20 per Zoran share and a USD/GBP exchange rate of 1.6147 on 16 June 2011, the last business day before this announcement and assuming the exercise of in-the-money options according to the treasury method.
2 This statement does not constitute a profit forecast and should not be interpreted to mean that earnings of the combined group in the first full year following the transaction, nor in any subsequent period, will necessarily match or be greater than those for any preceding financial year.
CSRs Chairman, CEO and CFO will lead the combined group. Dr. Levy Gerzberg, Co-Founder, President, CEO and Director of Zoran, will be joining the CSR board as a Non-Executive Director.
Completion is expected in the third quarter of 2011 and is subject to the approval of CSR and Zoran shareholders and other customary closing conditions. As was previously announced on 28 March 2011, CSR received early termination of the waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act.
The announcement of the proposed Transaction with Zoran on 21 February 2011 contains information on Zoran and the terms and conditions of the Transaction, which remain as stated in that announcement except as described in this announcement. Under the Revised Terms, the termination fees payable by each party have been amended as follows:
- US$8.6 million for all applicable circumstances where a termination fee is payable by CSR; and
- In the case of Zoran, US$8.6 million for all applicable circumstances where a termination fee is payable by Zoran other than if Zoran terminates to accept a superior proposal, in which case the termination fee is US$12.7 million.
Chief Executive Joep van Beurden commented, "I am delighted that we have been able to reach an agreement on revised terms. This transaction has strategic logic as it brings together our expertise in connectivity and location with Zorans extensive capabilities in imaging and video, increasing our addressable markets. It is financially compelling as it drives economies of scale and is strongly earnings enhancing. This is a key step forward as we pursue our strategy of expanding our business both organically and through selected acquisitions.
I am also pleased to report that our second quarter business is trading in line with previous guidance released on the 10 May 2011 for second quarter revenues of US$185 million - US$200 million and we can now update our guidance for second quarter revenues of US$190 million - US$195 million.
Dr. Levy Gerzberg, Co-Founder, President, CEO and Director of Zoran, added: Both companies agreed that it was in our mutual best interests to revise the deal terms. Under the Revised Terms, Zoran stockholders will receive increased certainty of value through the inclusion of a significant cash component, while still retaining upside in the combined group and its larger scale and synergies through the stock component. The combination of our extensive portfolio of proprietary technologies and market leading products with CSRs leading technologies and market-leading products will enable us to create new and compelling propositions for our customers and to create a new generation of products which merge imaging and video, with connectivity, location and audio capabilities. We believe this merger is the best alternative for Zorans shareholders, customers and employees.
Zoran also confirms its previously announced guidance for second quarter revenues of US$80 million - US$85 million.
A presentation, audio call and webcast for analysts and investors to discuss the Revised Terms will be held on Friday 17 June 2011, 9.00 am BST, at the offices of J.P. Morgan Cazenove, 20 Moorgate, London EC2R 6DA. Full details of the audio call and webcast are included below in this announcement. Dr. Levy Gerzberg will be participating on the audio call and webcast.
J.P. Morgan Cazenove and Rothschild acted as CSRs financial advisers and Slaughter and May and Wilson Sonsini Goodrich & Rosati acted as CSRs legal counsel. Goldman, Sachs & Co. acted as Zorans financial adviser and Jones Day acted as Zorans legal counsel.
CSR is a leading global provider of personal wireless technology, including Bluetooth, GPS, FM and Wi-Fi, to industry leaders in consumer electronics, mobile handsets and the automotive industry. Its technology has been adopted by market leaders into a wide range of mobile consumer devices such as mobile phones, automobile navigation and telematics systems, portable navigation devices (PNDs), wireless headsets, mobile computers, mobile internet devices, GPS recreational devices, digital cameras and games consoles, plus a wide range of personal and commercial tracking applications. CSR is headquartered in Cambridge, UK, and has offices in Europe, Asia and North America. As at 1 April 2011, it employed 1,613 people and in the financial period to 31 December 2010 generated gross profits of US$376.6 million on revenues of US$800.6 million. More information can be found at www.csr.com.
Zoran Corporation is a leading provider of digital solutions for the digital entertainment and digital imaging markets. With over two decades of expertise developing and delivering digital signal processing technologies, Zoran has pioneered high-performance digital audio and video, imaging applications and Connect Share Entertain technologies for the digital home. Zorans proficiency in integration delivers major benefits for OEM customers, including greater capabilities within each product generation, reduced system costs, and shorter time to market. Zoran-based DTV, set-top box, silicon tuners and receivers, DVD, digital camera, and multifunction printer products have received recognition for excellence and are now in hundreds of millions of homes and offices worldwide. Zoran is headquartered in Sunnyvale, California with operations in Europe, Asia and Israel. As of 1 February 2011, it employed approximately 1,550 people and in the year to 31 December 2010 generated gross profits of US$186.0 million on revenues of US$357.3 million (as reported, pro forma for the acquisition of Microtune on 30 November 2010).
Contact Zoran Corporation