Start-up chip firm Novafora to acquire Transmeta for $256 million

Novafora Inc, a privately-held start-up semiconductor firm, has agreed to acquire larger, established rival Transmeta Corporation for $255.6 million in cash, subject to certain working capital and other adjustments.

Novafora, based in San Jose, California, develops a family of digital video processors.

Under the terms of the agreement, Transmeta's stockholders will receive between $18.70 and $19.00 for each outstanding share of the company's common stock.

The merger, which has been approved by the boards of both Transmeta and Novafora, is subject to Transmeta's stockholder approval and other customary closing conditions, the companies said in a joint statement.
 
The agreement, among other things, has an exclusivity clause that bars Transmeta from entering into any future licensing transaction prior to closing of the merger without Novafora's consent.

The acquisition is expected to close in the first quarter of 2009. After the closing of the merger, Transmeta's common stock will cease to trade.

Novafora, in a separate non-exclusive patent licence agreement with Advanced Micro Devices (AMD), also acquired 700,000 shares of Transmeta's Series B preferred stock held by AMD.

"We are pleased with the value that we will be able to return to our stockholders as a result of this acquisition agreement with Novafora," said Les Crudele, president and CEO of Transmeta.

"We believe the deal is a win for all our stockholders. We have spent the past several months extensively exploring our strategic options and believe that the agreement with Novafora best serves the interest of our stockholders," he added.

"Transmeta's innovative technology and the expertise of its employees are valuable additions to Novafora," said Zaki Rakib, CEO of Novafora.  "Adding Transmeta's power management technology to our video processor will advance our vision of making our products applicable across the broadest range of video-oriented devices," he added.

Transmeta, known for its energy-efficient Crusoe processors, had challenged Intel by producing a line of low-power processors for desktops and notebooks. But it has fallen after it moved away from chip design.

In a filing with the US Securities and Exchange Commission, Transmeta sais it was putting itself up for sale and was actively seeking a buyer for what remains of its intellectual property.

Transmeta, which has moved away from chip design after it settled a patent suit with Intel, now relies on revenues from its LongRun and LongRun 2 technologies, which allow for dynamic control of the frequency, voltage and transistor leakage within a microprocessor.

In 2007, Transmeta settled a patent infringement lawsuit with Intel, which required Intel to make a one-time $150 million payment to Transmeta plus annual $20 million payments for the next five years.

Novafora, founded in 2004 by a group of successful entrepreneurs and video experts, is a video processor company enabling OEMs to deliver high quality digital video  quality video.