Canada Loses Another Tech Leader; Semtech buys Gennum

Today's news that California-based Semtech will buy Burlington's Gennum confirms, as Byron Capital analysts Tom Astle and Byron Berry recently suggested, that the trend of US tech firms buying Canadian ones is continuing into 2012.

Another one bites the dust.

In 2011, mostly due to buyouts from US firms, we lost many prominent Canadian techs that have been around for decades, including Zarlink, MOSAID and March Networks.

Today’s news from Gennum (TSX:GND) confirms, as Byron Capital analysts Tom Astle and Byron Berry recently suggested, that the trend is continuing into 2012.

Gennum today announced it has entered into a definitive arrangement agreement in which Semtech (NASDAQ:SMTC) will acquire all of the outstanding shares of Gennum for approximately $500-million.

Gennum has 35.5 million shares outstanding, so the market Tuesday expressed a great deal of confidence that the i’s will be dotted and t’s crossed on the deal. Shares of the company, at press time, were up 118% to $13.45, placing a market cap of $477 million on Gennum.

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Founded in 1973 as Linear Technology, Gennum is the back end that makes 3D TV happen. The company’s history is in semiconductor products for the video broadcast industry. Through acquisition and in-house innovation, Gennum has kept an aggressive stance with products that have kept it at the bleeding edge of broadcast technology. Many of Gennum’s products and services are complex, but the company’s mission boils down to making sure that the myriad of data communications it enables do not lose signal integrity.

Gennum had been growing slowly but incrementally for several years, and the company was on pace for a record year, revenue wise. Its Q3 revenue of $36.7-million was Gennum’s best-ever, but was only a 7% increase over the third quarter of 2010. Gennum’s board had been looking for ways to unlock shareholder value throughout 2011, declaring a dividend and, in September, initiating a share buyback.

California-based semiconductor supplier Semtech was founded in 1960. The company has grown its revenue from $284.7 million in 2008 to $454.5 in fiscal 2011.

After seeing his share price halved in the past five years, Gennum President and CEO Franz Fink said the move was the company’s best option for shareholders.

“We are delighted to join Semtech Corp., a company with a rich history of great engineering innovation and a strong position in several attractive high-growth markets” he said Tuesday. “After a comprehensive review of Gennum’s strategic options, we are convinced that this is the best avenue to unlock the underlying value for shareholders that has been created by the Gennum team,” adding “Our employees have been instrumental in building Gennum and will remain a critical component of the combined company as we move forward in the next chapter of our development. Together, Gennum and Semtech will form a stronger company, capable of accelerating growth beyond what would have been possible as separate entities.”

At press time, shares of Semtech were up 8.2% to $29.10 on the news.

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