July 17, 2012

Samsung Purchases CSR’s Mobile Unit for $310M

Enid Burns for redOrbit.com - Your Universe Online

Samsung Electronics acquired the handset connectivity and location development operations and technology of British firm Cambridge Silicon Radio (CSR). The deal, subject to regulatory review, is valued at $310 million in cash.

Under the deal, CSR will transfer all resources devoted to the development of CSR's handset connectivity technology, and a significant proportion of the resources dedicated to the development of handset location technology. With the acquisition, 310 people will move to Samsung. CSR will transfer 21 U.S. patents to Samsung, under the terms of the deal, as well as the respective international counterparts of the U.S. patents. The patents will be licensed back to CSR in perpetuity on a royalty-free basis. Samsung will be granted worldwide, perpetual, royalty-free, non-exclusive license of CSR's intellectual property rights used in its handset connectivity and location products, separate from the agreement on the patents.

The acquisition is a move to strengthen Samsung's mobile unit, which includes several handsets on the Android operating system, primarily under the Galaxy line. The Galaxy line includes the Samsung Galaxy S III, Galaxy Note, Galaxy Proclaim and Stratosphere Galaxy S. Tablets include several models of the Galaxy Tab. In the US, Samsung manufactures phones and tablets for AT&T, Sprint, T-Mobile, U.S. Cellular and Verizon Wireless.

Samsung and CSR have had business operations together already. CSR has been a supplier of location-tracking chips for Samsung's Galaxy phones and tablets. The company gets 25 percent of its revenue from Samsung, reports Bloomberg Businessweek.

The sale of its mobility unit might save CSR some money in the long run. CSR is "divesting a business which for them has been in decline because they lack the necessary kind of platform to really get into handsets," said Pia Tapley, analyst at Singer Capital Markets in London, as quoted in Bloomberg Businessweek. "We see revenue declining to negligible levels but they still have been investing in it. Today's deal means they don't have to do that anymore, so they get ride of a lot of cost."

CSR agreed to offload its mobility to focus on five high-growth market segments. Those segments include voice and music, automotive infotainment, indoors location, imaging and Bluetooth Smart. The company feels the sale of the mobility unit accelerates its higher margin platform strategy, and improves the company's market position.

The Samsung acquisition is valued at $310 million. Net proceeds are expected to be $209 million, after estimated tax costs, retention, restructuring and transaction related expenses. CSR intends to return up to $285 million to its shareholders. Dividends paid to shareholders include the equity investment, plus a remaining $40.5 million from a buy-back announced in February this year. Samsung will also invest $34.4 million for an equity stake in CSR, which represents 4.9 percent of the current issued share capital of CSR, at a price of 223 pence per share.

Bluetooth is an item of note in the acquisition. Cambridge Silicon Radio was the first company to put a Bluetooth radio on a mobile chip, reports ZDNet. CSR will continue to run its Bluetooth Smart operation. That segment is a low-power subset of Bluetooth 4.0, which allows devices such as smart running shoes, heart rate monitors and other devices, to operate for up to a year on very small batteries.

Samsung and CSR have agreed to a conditional binding agreement. The deal is expected to close during Q4 2012.