US Pixelworks to acquire Canadian ViXS Systems

Pixelworks Inc, a leading provider of visual processing solutions, and Toronto-based ViXS Systems Inc, a pioneer in media processing, encoding and transcoding solutions, have announced that the companies have entered into a definitive agreement under which Pixelworks will acquire all of the outstanding common shares of ViXS in an all-stock transaction consisting of approximately 3.7 million shares of Pixelworks common stock valued at approximately US$20.2 million. At the effective closing date, each share of ViXS will be exchanged for 0.04836 of a share of Pixelworks’ common stock. The exchange ratio is equivalent to consideration of US$0.26 per ViXS common share, based on the closing price of Pixelworks on May 17, 2017. Based on a 60-day trailing average stock price for Pixelworks of US$4.65 per share and C$0.21 (US$0.15) per share for ViXS, the transaction represents a premium of approximately 47.7%.
Pixelworks expects that the transaction will:
– Strengthen its patent portfolio with addition of more than 470 issued and pending worldwide patents held by ViXS;
– Broaden its product offerings and diversify revenue across end markets;
– Provide incremental scale and R&D to pursue expanded technology development;
– Create an opportunity to offer premium visual processing and end-to-end video delivery solutions;
– Advance ViXS’ Industry Leading “Cord Cutter” OTA platform for viewing broadcast video content; and
– Be accretive to its full-year 2018 earnings per share.
President and CEO of Pixelworks, Todd DeBonis, commented: “Today’s announced acquisition of ViXS represents a unique opportunity to strengthen our position as a known technology leader with extensive visual and video processing expertise. In addition to adding highly complementary technology and product offerings, the transaction is expected to provide the potential to meaningfully accelerate the development of comprehensive end-to-end video streaming solutions. Similar to Pixelworks, ViXS has a long heritage in visual processing solutions with a team of engineers that have deep technical expertise. ViXS divested its legacy MoCA business earlier this year and narrowed its strategic focus to efficient delivery solutions for high-quality video, including best-in-class transcoding and decoder technologies.
“Additionally, Pixelworks’ acquisition of ViXS holds the potential to deliver meaningful value to our respective customers and shareholders. Importantly, we expect the acquisition to be accretive to Pixelworks’ full-year 2018 earnings, even when considering the dilution. The transaction also combines the intellectual property and R&D resources of the two companies in support of current and future product development efforts.”
Commenting on the proposed acquisition, Sohail Khan, President and CEO of ViXS, said: “This transaction represents a compelling opportunity to achieve greater scale and market penetration with our best-in-class UHD/HDR solutions for Consumer and Video Delivery Infrastructure market segments. Additionally, Pixelworks’ acquisition of ViXS is expected to provide not only world class engineering and technology, but a joint platform to monetize industry-leading innovation into significant value to our customers, employees and shareholders.”
ViXS’s board of directors has, after consultation with its financial and legal advisors and based on the recommendation of its special committee of independent directors established to consider the transaction, determined that the proposed transaction is fair to ViXS’s shareholders and in the best interests of ViXS, and it recommends that ViXS shareholders vote in favour of the transaction. Needham & Company, acting as financial advisor to ViXS, delivered a fairness opinion to the ViXS board of directors. The transaction has also been approved by Pixelworks’ board of directors.
The transaction will be effected by way of a court-approved plan of arrangement under the Canada Business Corporations Act. The transaction is subject to a number of closing conditions, including approval by the Ontario Superior Court of Justice (Commercial List) and obtaining certain third-party consents. The arrangement agreement provides for customary deal protections, including a non-solicitation covenant by ViXS.
ViXS will hold an annual and special meeting of shareholders no later than July 28, 2017 to conduct the annual business of the company and to consider the transaction. In order for the transaction to proceed, it must be approved by at least 66 2/3% of the votes cast at such meeting.
The directors and officers of ViXS and certain shareholders, collectively holding 36% of ViXS’ common shares, have entered into support and voting agreements and agreed to vote their common shares in favor of the transaction at the meeting.