"Globes" recently revealed talks on a big exit in the Israeli high-tech industry, whereby InfiniBand developer Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX)would buy home networking solutions provider CopperGate Communications Ltd.. It turns out that that was just the start of the drama.
Since the negotiations with Mellanox were reported two months ago, that potential buyer has changed its mind, despite a signed memorandum of understanding, and has apparently withdrawn completely from execution of the deal.
Now, its place has been taken by another contender: US chip company Sigma Designs Inc. (SIGM), which is at an advanced stage of negotiations to acquire CopperGate for $200-250 million.
CopperGate was founded in 2000 by David Baum and Israel Lifshitz. It is now managed by CEO Gabi Hilevitz. The company is one of the most prominent chipset start-ups in Israel, and was chosen as one of "Globes'" most promising start-ups for 2007-2008.
CopperGate has led the development of the HomePNA standard for high-speed data transmission in the home, at speeds of up to 320 Mbps. The standard uses existing copper telephony and power wiring for high-speed transmission of video, voice, and data between rooms and between users.
Although the initial appeal of a possible deal with local company Mellanox, which meant the establishment of a large Israeli chipset company, was alluring, a link-up between CopperGate and Sigma makes much more strategic sense.
Sigma was founded in 1982. It currently has a market cap on Nasdaq of $390 million. The company develops chipsets for consumer electronics, and its market is home telecommunications and media installations, which is also CopperGate's market. Mellanox on the other hand operates in the very different enterprise communications market.
Tamir Fishman Venture Capital (TASE: TFVC), which owns 31% of CopperGate, reports each quarter on the estimated value and various future options for CopperGate. In the last quarterly report, its estimated value for CopperGate jumped to about $200 million.
It is currently still early to tell how a deal will be structured. Sigma, which has made two acquisitions in the past year, won't want to deplete its cash level, and may prefer a higher proportion of shares in the deal.
Published by Globes [online], Israel business news - www.globes-online.com - on September 30, 2009
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