GlobeSpan, Virata merge

Two providers of chips and software to DSL systems maker--GlobeSpan and Virata--are merging in an all-stock deal valued at $543 million.

Under the terms of the transaction, GlobeSpan will swap 1.02 shares of common stock for each share of Virata common stock. GlobeSpan shareholders will own 52.5% of the combined company. Share prices of both companies dropped yesterday following the announcement but were up again Tuesday in morning trading.

The terms of the transaction do not include a collar, a device that protects against a marked decline in either company’s stock prior to the deal’s closing. The deal is still subject to shareholder approval and is expected to take three to six months to complete.

GlobeSpan develops chipsets and software for DSL applications, and Virata provides software and semiconductors to manufacturers of DSL, wireless, satellite and other broadband systems

In its fiscal first quarter of 2002 ending July 1, Virata’s revenues dropped 27% from last year’s comparable quarter. International revenues--mostly from customers based in Taiwan, Germany and Hong Kong--accounted for 93% of sales in the quarter. Sales to Siemens AG accounted for half of all revenues.

In the second quarter, GlobeSpan’s revenues and profit declined 20% year-over-year.

The new company, dubbed GlobeSpan Virata, will have combined pro forma revenues of $528 million for the 12 months ending June 30 and a combined market cap of about $1.2 billion. It will also have $135 million in debt and $700 million of cash and equivalents on its balance sheet.

--Vincent Ryan, Business Editor