THE chief executive of NASDAQ-listed Cirrus Logic has no intention of dismantling Wolfson Microelectronics and wants to maintain Edinburgh as an engineering centre, after launching a £291 million takeover bid for the chip maker.
Jason Rhode said the proposed acquisition, which has been backed by the boards at both companies, is being made with a view to the long term. He said: "Both teams have done a great job on their own and I think this is a case where really clearly the combination will benefit from increased scale and be much greater than the sum of its parts.
"We were faced with a situation where we have got a lot more things we wanted to develop than we could possibly figure out how to hire organically for internally. So this really made sense as a combination. It turns out that once we started talking it really made sense to both sides."
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Wolfson shares rocketed 100.5p, or 75%, to close 234.5p following news of the bid.
Cirrus already supplies its chips and components to Apple, Sony, Ford and Motorola. It believes the addition of Wolfson will give it a greater range of products and intellectual property as well as access to experienced engineering talent. Cirrus has pencilled in around £4m for one-off integration costs but was unable to suggest how many jobs may be lost through the restructuring as detailed discussions on that would not take place until a deal is completed.
However Mr Rhode indicated he was keen to preserve much of what Wolfson already has in place but some operational and corporate functions may overlap.
He said: "If you manage to build an engineering team that is capable of building parts on this level the last thing you want to do is mess it up. We are getting into this as we want to see these product development teams continue to do what they do.
"There will be value created by the combination but in large part we are entering into this because we want to see the Wolfson folks continue to develop great products for the customers they are serving."
Cirrus also said it sees Edinburgh, where 280 staff are based, and Wolfson's site at Newbury, Berkshire, which has around 70 people, as key European centres for the enlarged group.
Shareholders in the Edinburgh University spin-out are being offered 235 pence per share, a premium of 72.6% on the average across the last six months.
Wolfson's remuneration committee has approved a £500,000 cash payment to chief executive Mike Hickey and £250,000 for chief financial officer Mark Cubitt if the deal goes through. Mr Hickey has more than 346,000 shares with a further 1.7 million potentially available through share schemes. Mr Cubitt owns almost 93,000 shares and could receive a further 868,325.
The company's board, together holding around 1.35 million shares or 1.16% of the issued share capital, has given irrevocable undertaking to back the transaction. Odey Asset Management, which has 5.88% of Wolfson, has also committed.
Mr Rhode said: "This represents quite a healthy premium and is reflective of the value that adding Wolfson in Cirrus adds so I think that will be pretty well received by Wolfson shareholders."
Other large shareholders in Wolfson include Fidelity Worldwide Investors with 10.6%, Majedie Asset Management at 7.82% and Henderson Global Investors on 6.18%.
Michael Ruettgers, Wolfson chairman, said: "Together with Cirrus Logic, we believe this will create a powerful platform for future growth, above and beyond our standalone potential."
A meeting to vote on the deal is to be held before the end of June with Cirrus hoping to complete the purchase by the end of October.
Separately Wolfson, which makes components for the likes of Samsung, LG, and Fujitsu, unveiled a wider underlying first quarter operating loss of $4.5m, compared to $2.8m in the first three months of 2013.
That came on the back of revenue tumbling from $48.1m to $28.8m which the company said was related to customers running down inventories ahead of new product launches as well as unsold smartphones as part of a faster than expected transition from 3G to 4G.
Pia Tapley, analyst at N+1 Singer, said: "Our confidence in Wolfson's technology has not been fully reflected in the financial performance of the company.
"However, the premium valuation in [the] bid reflects the IP in the product portfolio and the potential which this has in a larger scale business."