A private equity firm’s bid for Newport Beach-based Conexant Systems Inc. comes with an interesting twist: a former chief executive at the chipmaker who was ousted a few years back.
Dan Artusi, who led Conexant for about nine months until early 2008, now is an operating executive at San Francisco-based Golden Gate Private Equity Inc.
Last week, Golden Gate made a roughly $300 million offer for Conexant, putting an all-but-certain $284 million buyout by Hauppage, N.Y.-based chipmaker Standard Microsystems Corp. in question.
Industry watchers believe Artusi spearheaded Golden Gate’s offer based on his knowledge of Conexant.
At Golden Gate, Artusi is “focused on semiconductor and communications investment opportunities,” according to the company’s website.
Golden Gate has some $9 billion under management. The private equity firm declined to comment for this story.
The firm had a big hit last year with a $315 million sale of Irvine-based chipmaker Teridian Semiconductor Corp. to Sunnyvale’s Maxim Integrated Products Inc.
Golden Gate also is an investor in Beverly, Mass.-based Orchard Brands, which owns Irvine clothing seller Draper’s & Damon’s LLC.
The firm’s offer for Conexant values the company at $295 million to $309 million, or 4% to 9% higher than Standard Microsystems’ January offer.
Conexant’s stock popped on the rival bid, rising about 20% last week to a market value of some $200 million.
Bidding War?
Whether Golden Gate’s move leads to a bidding war is unclear.
Standard Microsystems last week said its original deal with Conexant still is intact. Predictably, it said its deal is in the best interest of shareholders.
“We continue to believe that the combination of Conexant and Standard Microsystems provides for a highly complementary merger of talent and technology that is in the interests of Conexant stockholders, customers and employees,” Chief Executive Christine King said in a statement. “We believe that SMSC and Conexant together have the opportunity to take advantage of economies of scale and drive profitable growth, and that our proposal would provide Conexant stockholders with the opportunity to participate in the future success of the combined company.”
The company’s deal “remains in effect,” Standard Microsystems said, until Conexant’s board gives the green light to accept another “superior” proposal.
Golden Gate’s bid is subject to a look at Conexant’s books.
Conexant, a maker of chips for multifunction office printers, digital picture frames, PC speakers and other devices, said the bid could lead to a superior proposal that’s in the best interest of shareholders.
The company has yearly sales of about $200 million.
Standard Microsystems makes chips for disk drives, keyboards, Universal Serial Bus ports, networking devices, portable electronics and other products with industrial uses.
It has yearly sales of about $400 million.
Golden Gate’s bid for Conexant came out of left field, according to analysts.
“We are surprised to see a higher bid for Conexant, particularly from a financial buyer given the (company’s) eroding revenue base and high debt load,” said Blayne Curtis, an analyst at Jefferies & Co.
Conexant saw sales for the three months through December fall 25% to $46 million as sales from older products continued to fade.
The company had long-term debt of $174 million as of Dec. 31.
Standard Microsystems could up the ante, according to Curtis.
“While we are admittedly very surprised by this latest offer, we believe there is a high likelihood that Standard Micro will revise its offer given the strategic fit between the two companies,” he said.
Still, Curtis said he’s doesn’t expect “a full out bidding war” for Conexant.
Standard Microsystems has some $160 million in cash on hand, which doesn’t provide a great deal of wiggle room to boost the cash portion of its offer, which now is $92 million.
The interest in Conexant comes after a turnaround that started with the arrival of Chief Executive Scott Mercer, a longtime board member who was brought in after Artusi left abruptly in spring 2008.
Dwight Decker—Conexant’s former chief executive who led the company for nearly all of its life since spinning off from aerospace contractor Rockwell International Corp. in 1999—recruited Artusi.
Artusi
Artusi came to Conexant after two years as chief executive of Austin, Texas-based ColdWatt Inc., a maker of electronics that convert power from wall outlets for use in computers.
Before that, Artusi spent four years at Austin chip designer Silicon Laboratories Inc., including a year as chief executive.
He joined Silicon Laboratories in 2001 from what now is Freescale Semiconductor Inc., a Motorola Inc. spinoff in Austin.
For most of Artusi’s career, he was with Motorola Inc.’s chip division, serving as vice president and general manager of various units.
An Argentina native, Artusi currently serves on the board of Santa Clara’s Atheros Communications Inc., which is being acquired by San Diego-based Qualcomm Inc.
Artusi made some drastic changes in his short time at Conexant.
He brought in executives, cut some 700 jobs and stopped funding chip programs that were slow to grow or that weren’t profitable.
Artusi left Conexant in what some said was a clash with Decker and other directors over the pace of restructuring.
Decker left Conexant’s board last year.
Mercer largely picked up where Artusi left off in terms of reworking Conexant.
In the past two years, Conexant has reworked debt, sold stock and debt, sold a chunk of land near its headquarters and done a handful of patent sales.
Mercer’s also nixed underperforming products, shed units that weren’t profitable or growing and made small buys to get into markets set to grow.
Mercer was set to step down from his post pending the closure of the deal with Standard Microsystems.
He was set to be replaced by Sailesh Chittipeddi, who was slated to run Conexant as a unit of Standard Microsystems and head up the parent company’s global engineering and product lines as an executive vice president.
It’s unclear what Conexant’s leadership would look like under Golden Gate, or if the firm would put Artusi back in charge.
The Helm | Conexant’s leaders, past and present
Sailesh Chittipeddi
Conexant president, COO
Joined in 2006, set to lead business, global engineering as part of Standard Microsystems.
Scott Mercer
Conexant CEO
Led restructuring that drew buyout offers, set to step down after acquisition.
Dwight Decker
Former chairman, CEO
Led Conexant for most of its life since 1999 spinoff from Rockwell International.
