Zoran Corporation to purchase Oak Technology for 2.44 times revenue

Weekly Corporate Growth Report, May 12, 2003

The Deal: Zoran Corporation has agreed to acquire Oak Technology in a cash-and-stock transaction valued at about $358 million. Under the terms of the agreement, Zoran will pay 0.2323 shares of Zoran stock and $1.78 in cash for each share of Oak Technology. Based on recent Zoran closing prices, the deal values Oak at approximately $5.88 per share. The deal includes about $100 million in total cash. After the transaction closes, Zoran shareholders will own about 66.6 percent of the combined company and Oak shareholders will own the remaining 33.4 percent. The deal has been approved by the boards of both companies but still requires regulatory and shareholder approvals. The transaction is expected to close in the third quarter of 2003.

Discussion: Oak Technology makes chips for high-definition television (HDTV) and digital imaging systems. The semiconductor company's primary products are controller chips that help run DVD players and that allow PCs to communicate with CD-ROM drives and rewritable compact disc drives.

Zoran Corp. makes makes specialized integrated circuits and software for digital video and audio compression applications. The company's products compress images for DVD's, digital cameras, and PC photo-editing applications.

Zoran expects the acquisition to add to earnings, before amortization and goodwill, in the first half of 2004.