Newport Beach’s Jazz Semiconductor Inc. said Monday it’s set to be bought by Israeli chipmaker Tower Semiconductor Ltd. for $169 million.
Shares of Jazz Technologies Inc., parent of the chip plant operator, jumped more than 9% in afterhours New York trading on a recent market value of about $16 million.
Tower is paying about $40 million in stock, and assuming an additional $129 million in debt.
Under terms of the deal, each share of Jazz is set to be converted into almost two shares of Tower.
Tower Semiconductor was founded in 1993 and is based in Migdal Haemek, Israel. It’s publicly traded in the U.S. with a recent market value of about $144 million.
A few months ago, Jazz Technologies Chief Executive Gil Amelio said the company had hired UBS Securities LLC to look at “various strategic alternatives.”
“This definitive agreement is the result of that process,” he said.
The deal is expected to close during the second half of the year.
Company executives said earlier this year that Jazz needed to double in size to compete with bigger rivals.
Jazz makes silicon wafers, the building blocks of chips, for other companies. It has seen its stock fall by about 75% in the past year as it has struggled to find its place as a U.S. contract chipmaker in an industry dominated by big Asian rivals.
The company’s been operating in the red for some time.
During the first quarter, Jazz had sales of about $51 million. It narrowed its loss to $4 million, less than the roughly $13 million it lost a year earlier.
The company closed out the quarter with about $9 million in cash on its books and $138 million in debt.
Jazz got its start as the chip making arm of Rockwell International Inc.’s semiconductor unit, which made chips for modems.
Rockwell spun off the business as Newport Beach-based Conexant Systems Inc. in 1999.
In 2002, Conexant split off its Newport Beach chip factory as Jazz Semiconductor.
Last year, Apple Inc. alums Gil Amelio, Steve Wozniak and Ellen Hancock bought Jazz after raising money from investors in 2006.
Amelio runs both the parent company and Jazz Semiconductor as chief executive.
He saw potential in the floundering company and had launched a major restructuring that lasted the better part of a year.
“It takes a while to build a mature company,” Amelio told the Business Journal last year. “That process wasn’t yet complete at Jazz. The company, at least from my perspective, is young and somewhat underdeveloped. It nonetheless is really promising.”
Jazz runs one of only two plants that actually make chips in Orange County,most companies design chips here and have them made at factories in Asia.
Irvine-based Microsemi Corp. is the other with a plant here, in Garden Grove.
