Contact: Thejeswi Venkatesh
Two years after unsuccessfully suing competitor MicroProbe for patent infringement, FormFactor on Tuesday announced that it would acquire the Flywheel Ventures-backed company for $100m in cash and $16.8m in stock.
Both companies design and manufacture semiconductor wafer test probe card systems, which are used by semiconductor manufacturers to test wafers before they are cut up into individual chips. The deal helps memory market-focused FormFactor diversify its revenue base and shore up its presence in the growing system on a chip (SOC) market, where MicroProbe has a significant presence.
FormFactor’s DRAM memory segment, which constitutes more than two-thirds of its revenue, declined 12% in 2011 due to an oversupply of memory devices and a resulting reduction in demand for its probe cards. That decline hurt its stock price, which is now at its lowest point ever. On the other hand, its SOC segment fared better, driven by the proliferation of complex processor-like devices powering PCs, tablets and other mobile connectivity. FormFactor’s SOC segment, which currently constitutes 15% of its business, grew 6% in 2011. For its part, MicroProbe has grown its sales robustly, going from $60m in calendar year 2010 to $98.1m for the 12 months ended June 30, 2012.
The transaction values MicroProbe at 1.2 times trailing sales, right in the ballpark of similar deals. For comparison, we could look at Advantest’s acquisition of Verigy for 1.5 times sales in December 2010. Needham & Company, which advised MicroProbe on its $26m sale to Flywheel Ventures in 2008, advised FormFactor on the purchase. Morgan Stanley banked MicroProbe.
For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.