Conexant, Alpha form US$3B wireless chip venture

Conexant Systems Inc. and Alpha Industries Inc. have agreed to merge their wireless chip manufacturing operations into a US$3 billion, yet-to-be-named new company that will produce a broad range of components for mobile devices.

The complex deal calls for Alpha to acquire a Newbury Park, California, GaAs wafer fabrication (gallium arsenide) plant from Conexant, after which the new company created through the transaction will purchase a Conexant semiconductor plant in Mexicali, Mexico, for $150 million. Alpha shareholders will own 33 percent of the resultant company, with Conexant shareholders owning the remaining 67 percent. Alpha Chief Executive Officer (CEO) David Aldrich will continue as CEO of the new company, which plans to base its executive offices in Woburn, Massachusetts, and Newport Beach, California, and employ 4,000 people worldwide.

The new company, which intends to announce its name and new stock ticker symbol in the next few months, will sell to many of the industry's leading wireless device manufacturers, executives said. Its top four handset manufacturing customers will be Nokia Corp., Motorola Inc., Sony Ericsson Mobile Communications AB (a joint venture of Sony Corp. and Ericsson SpA) and Samsung Corp., according to Conexant and Alpha.

While the entirety of Alpha will be subsumed into the new company, pieces of Conexant will survive the merger as company executives pursue a plan to split Conexant into three independent, publicly traded companies. Conexant intends to spin off its Internet infrastructure business, Mindspeed Technologies, when market conditions improve. After the Mindspeed spin-off and the Alpha merger, what remains of Conexant will focus entirely on broadband access applications.

The merger has already been approved by the boards of directors of both companies. Pending shareholder and regulatory approvals, the combination is expected to be completed in the second quarter of 2002.

Following Monday morning's announcement of the merger, shares of Conexant (CNXT) climbed 4.5 percent over Friday's close to end the day at $16.57 in trading on the Nasdaq exchange. Shares of Alpha (AHAA) climbed 24.3 percent over Friday's close, to $26.35, also on the Nasdaq exchange.

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