Power Electronics

Dialog Semiconductor to Acquire iWATT

Dialog Semiconductor Plc a provider of highly integrated power management, audio and short-range wireless technologies, iannounced that it has entered into an agreement to acquire iWatt Inc., a provider of digital power management ICs, for a cash payment of approximately $310 million, with additional contingent consideration of up to $35 million.

Acquisition highlights:

  • Enhances Dialog's leadership in power management for Tablets and Smartphones by adding iWatt's complementary AC/DC digital power management technology
  • Diversifies Dialog's product portfolio, adding two high growth product families; AC/DC charger adaptor ICs and a broad range of LED Solid State Lighting ICs
  • Adds new Tier-1 customers and expands Dialog's business opportunities at existing Smartphone Tier-1 OEMs
  • Expands Dialog's addressable market into the adjacent digital power management space, unlocking new growth opportunities and increasing TAM by a potential $1.8 billion to $5.9 billion by 2015
  • Adds a portfolio of more than 110 patents
  • Brings a high growth business with FY2012 revenue of $74 million (growth of 46% over FY2011) and FY2012 gross margin of 49%(*)
  • Expected to be accretive in the first quarter after closing to underlying EPS

Headquartered in Silicon Valley, California, with approximately 180 employees worldwide, iWatt is a leading provider of digital power management integrated circuits. iWatt has a strong design and application engineering presence in Asia. Its innovative PrimAccurate™ technology platform enables high performance, energy-efficient, small form-factor and cost-effective solutions for markets such as AC/DC power conversion and LED Solid State Lighting (SSL). The company's solutions are designed into the products of leading global OEMs and it has shipped more than one billion power management ICs since 2007.

The overall global power management semiconductor market is expected to grow to $11.5 billion by 2015, according to Gartner. The acquisition of iWatt provides Dialog with an entry into the following high growth segments of this market:

AC/DC power conversion: The vast majority of the world's electronic devices that plug into an electric wall outlet require the conversion of high-voltage AC power to low-voltage DC. Robust growth in portable device markets including Smartphones, Tablets and Ultrabooks is driving the increased need for a new generation of intelligent AC/DC chargers that will be more power efficient, enable a quicker charge time and be available in a smaller form factor.

LED solid state lighting (SSL): The general lighting market is undergoing a transition from traditional incandescent light sources to more energy-efficient technologies, such as LED SSL. LED SSL has many advantages over competing light sources, including lower energy consumption, longer lifetime, reduced form factor, quality of light emitted and reduced environmental impact. LED SSL adoption is expected to accelerate due to emerging global regulatory mandates and incentives, as well as falling costs from improvement in technology and manufacturing yields. According to McKinsey, total LED SSL global shipments are expected to grow from 440 million units in 2012 to 2.7 billion units by 2016, resulting in increased demand for iWatt LED SSL ICs.

Under the terms of the acquisition agreement, the shareholders of iWatt will receive an up-front payment of approximately $310 million in cash, plus up to approximately $35 million in contingent consideration. The contingent consideration is based on achieving future revenue targets. The acquisition is being funded from both Dialog's existing cash resources and additional debt facilities of $125 million. The transaction on an underlying basis is expected to be accretive in the first quarter after closing and on an IFRS basis by the end of 2014. The boards of directors of both companies have approved the acquisition, with the transaction expected to by the end of July 2013.

In financial year 2012, iWatt generated revenue of $74 million (growth of 46% over 2011), with an associated gross margin of 49% compared to 45% in 2011). Revenue growth for the acquired business in the order of approximately 20% per year - in line with anticipated market growth projections - is expected to be achieved in the medium term. Additional financial details and guidance will be provided in Dialog's second quarter earnings call planned for July 23, 2013.

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