It wasn’t a surprise when Sunnyvale’s Maxim Integrated Products Inc. bought Irvine-based Teridian Semiconductor Corp., a maker of chips for energy meters, last month.
What was a surprise was the price tag—$315 million—which some industry watchers say is the biggest deal of its kind in nearly a decade.
“Teridian was in the right place at the right time,” said David Craemer, managing director at Jefferies & Co. in Silicon Valley, who worked on the deal. “There were competitive offers and multiple interested parties at the table. The competition helped drive valuations.”
Teridian, which was once an ailing unit of Japan’s TDK Corp., was bought five years ago by San Francisco private equity firm Golden Gate Capital.
At the time, Teridian was struggling to add market share for its networking, TV set-top box and other specialized chips for measuring energy usage.
“It looked like a bit of a dog when TDK spat it out,” said Robert Lee, senior vice president at Jefferies. “The meter business wasn’t considered high-growth at the time. Golden Gate did a really good job.”
The investors at Golden Gate sure got a good deal out of it—sources familiar with the company say the group paid only about $20 million for Teridian.
That makes for a pretty cushy return on their investment.
“That (sale) price was greater than the market cap of a lot of chipmakers here,” said Teridian Chief Executive Jerry Fitch. “It was impressive.”
He’s right, to a point.
Newport Beach’s Mindspeed Technologies Inc.’s market value clocked in at about $310 million late last week. Neighboring chipmaker Conexant Systems Inc. had a value of roughly $210 million.
The deal price doesn’t touch the likes of OC’s top chipmaker Broadcom Corp., which has a market value of $17 billion, or Irvine’s Microsemi Corp., which has a value of $1 billion.
Deals, Details
Recent local chip deals can’t top Teridian.
The closest is Sierra Monolithics Inc., which for a short time had its headquarters in Irvine last year. It was acquired in November by Camarillo-based chipmaker Semtech Corp. for $180 million.
“For fabless chip companies, (Teridian is) the biggest deal since 2001,” Craemer said.
(Chipmakers that are called “fabless” design their own chips but contract with others to produce them.)
What drove up Teridian’s selling price were eager bidders, a hot market and good timing.
Teridian has more than half of the market for chips that go into a new type of electricity meter that operates as part of a smart grid designed to reduce energy consumption.
“The meter market hadn’t been terribly sexy until recently,” Craemer said. “It’s a hot area that helped to create a lot of potential buyers for Teridian.”
Late last fall, around a dozen chipmakers threw their hats in the ring, according to Fitch. Although he declined to give specifics, most were “publicly traded chipmakers,” he said.
The company reached a “tipping point” in November, according to Lee, at which point it launched a formal process to pursue a buyout.
“Most of the semi players in the industry didn’t really understand or see the opportunity for smart meters until recently,” he said. “But Jerry and the team had been working on these types of devices for many years.”
Company Overview
Teridian was an attractive target. At the time of the sale, it supplied chips to three of the top four major meter makers in the U.S. and to some 50 meter makers around the world.
Its smart meter chips use networking technology to track electricity usage and send data to utility companies and residents.
The technology helps utility companies get more accurate meter readings, cut down on billing errors and prevent tampering.
The company counts some 70 customers, which build meters and sell them to utilities.
They include General Electric Co., South Carolina’s Actaris Liquid Measurement LLC, Germany’s Elster Group SE and Australia’s Landis & Gyr Holdings Pty.
Teridian has about 100 workers in Irvine and sees an estimated $75 million in yearly sales.
It’s unclear whether Maxim, which sees yearly sales of $1.7 billion, will cut jobs here as it integrates Teridian.
Fitch is set to run the business as executive director of Maxim’s microcontroller business and will report to a Maxim executive in Dallas, he said.
Fitch’s background isn’t in chips or engineering—he’s a finance guy. Before coming to TDK, he was chief financial officer at Glendale-based Airport Group International, which manages airports around the world. The GE Capital-backed company was sold for $300 million in 1999.
Fitch said he’s “thrilled with the outcome,” of the deal.
“It really validates everything we have been doing for the past five years,” he said. “The end outcome kind of speaks for itself.”
