Combines Visual Display Processing and
Comprehensive End-to-End Video Delivery To Create Industry Leader
of High-Quality Video Streaming Solutions
Pixelworks, Inc. (NASDAQ: PXLW), a leading provider of visual
processing solutions and Toronto-based ViXS Systems Inc. (TSX:
VXS), a pioneer in media processing, encoding and transcoding
solutions, today announced that the companies have entered into a
definitive agreement under which Pixelworks will acquire all of the
outstanding common shares of ViXS in an all-stock transaction
consisting of approximately 3.7 million shares of Pixelworks common
stock valued at approximately US$20.2 million. At the effective
closing date, each share of ViXS will be exchanged for 0.04836 of a
share of Pixelworks’ common stock. The exchange ratio is equivalent
to consideration of US$0.26 per ViXS common share, based on the
closing price of Pixelworks on May 17, 2017. Based on a 60-day
trailing average stock price for Pixelworks of US$4.65 per share
and C$0.21 (US$0.15) per share for ViXS, the transaction represents
a premium of approximately 47.7%.
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Transaction Highlights
Pixelworks expects that the transaction will:
- Strengthen its patent portfolio with
addition of more than 470 issued and pending worldwide patents held
by ViXS;
- Broaden its product offerings and
diversify revenue across end markets;
- Provide incremental scale and R&D
to pursue expanded technology development;
- Create an opportunity to offer premium
visual processing and end-to-end video delivery solutions;
- Advance ViXS’ Industry Leading “Cord
Cutter” OTA platform for viewing broadcast video content; and
- Be accretive to its full-year 2018
earnings per share.
President and CEO of Pixelworks, Todd DeBonis, commented,
“Today’s announced acquisition of ViXS represents a unique
opportunity to strengthen our position as a known technology leader
with extensive visual and video processing expertise. In addition
to adding highly complementary technology and product offerings,
the transaction is expected to provide the potential to
meaningfully accelerate the development of comprehensive end-to-end
video streaming solutions. Similar to Pixelworks, ViXS has a long
heritage in visual processing solutions with a team of engineers
that have deep technical expertise. ViXS divested its legacy MoCA
business earlier this year and narrowed its strategic focus to
efficient delivery solutions for high-quality video, including
best-in-class transcoding and decoder technologies.
“Additionally, Pixelworks’ acquisition of ViXS holds the
potential to deliver meaningful value to our respective customers
and shareholders. Importantly, we expect the acquisition to be
accretive to Pixelworks’ full-year 2018 earnings, even when
considering the dilution. The transaction also combines the
intellectual property and R&D resources of the two companies in
support of current and future product development efforts.”
Commenting on the proposed acquisition, Sohail Khan, President
and CEO of ViXS, “This transaction represents a compelling
opportunity to achieve greater scale and market penetration with
our best-in-class UHD/HDR solutions for Consumer and Video Delivery
Infrastructure market segments. Additionally, Pixelworks’
acquisition of ViXS is expected to provide not only world class
engineering and technology, but a joint platform to monetize
industry-leading innovation into significant value to our
customers, employees and shareholders.”
Additional Transaction Details
ViXS’s board of directors has, after consultation with its
financial and legal advisors and based on the recommendation of its
special committee of independent directors established to consider
the transaction, determined that the proposed transaction is fair
to ViXS’s shareholders and in the best interests of ViXS, and it
recommends that ViXS shareholders vote in favour of the
transaction. Needham & Company, acting as financial advisor to
ViXS, delivered a fairness opinion to the ViXS board of directors.
The transaction has also been approved by Pixelworks’ board of
directors.
The transaction will be effected by way of a court-approved plan
of arrangement under the Canada Business Corporations Act. The
transaction is subject to a number of closing conditions, including
approval by the Ontario Superior Court of Justice (Commercial List)
and obtaining certain third-party consents. The arrangement
agreement provides for customary deal protections, including a
non-solicitation covenant by ViXS. A copy of the arrangement
agreement will be available under ViXS’s profile on SEDAR at
www.sedar.com.
ViXS will hold an annual and special meeting of shareholders no
later than July 28, 2017 to conduct the annual business of the
company and to consider the transaction. In order for the
transaction to proceed, it must be approved by at least 66 2/3% of
the votes cast at such meeting.
The directors and officers of ViXS and certain shareholders,
collectively holding 36% of ViXS’ common shares, have entered into
support and voting agreements and agreed to vote their common
shares in favor of the transaction at the meeting.
Further information regarding the transaction will be included
in an information circular to be mailed to ViXS shareholders in due
course. The transaction is expected to close in the third calendar
quarter of 2017.
Pixelworks’ legal counsel are Pillsbury Winthrop Shaw Pittman
LLP in the U.S. and Stikeman Elliott LLP in Canada, and ViXS’s
legal counsel is Gowling WLG in Canada and David Wright Tremaine in
the U.S. Needham & Company is acting as financial advisor to
ViXS.
Further details can be found in Pixelworks’ Form 8-K filed with
the Securities and Exchange Commission. Additional information
about ViXS is available on the Company’s website at
www.vixs.com.
Conference Call Information
Pixelworks and ViXS will host a joint conference call today, May
18, at 5:30 p.m. Eastern Time/ 2:30 p.m. Pacific Time, to discuss
the proposed transaction. The conference call can be accessed by
calling 1-877-359-9508 and using passcode 25012334. International
callers may join the teleconference by dialing +1-224-357-2393 and
entering the same passcode at the prompt. A Web broadcast of the
call can be accessed by visiting the Investor Relations section of
Pixelworks' website at www.pixelworks.com. For those unable to
listen to the live Web broadcast, a replay will be made available
on the Web site. A replay of the conference call will also be
available through May 25, 2017, and can be accessed by calling
1-855-859-2056 and using passcode 25012334.
About Pixelworks, Inc.
Pixelworks creates, develops and markets visual display
processing solutions for applications that demand the very highest
quality images. At design centers around the world, Pixelworks
engineers constantly push visual processing performance to keep
manufacturers of consumer electronics and professional displays
worldwide on the leading edge. The Company is headquartered in San
Jose, CA. For more information, please visit the Company’s Web site
at www.pixelworks.com.
Note: Pixelworks and the Pixelworks logo are registered
trademarks of Pixelworks, Inc.
About ViXS Systems Inc.
ViXS is a pioneer and market leader in designing revolutionary
media processing semiconductor solutions for video over IP
streaming solutions, with more than 470 patents issued and pending
worldwide, numerous industry awards for innovation, and over 33
million media processors shipped to date. ViXS is driving the
transition to Ultra HD 4K across the entire content value chain by
providing professional and consumer grade chipsets that support the
new High Efficiency Video Coding (HEVC) standard up to Main 12
Profile, reducing bandwidth consumption by 50% while providing the
depth of color and image clarity needed to take advantage of
higher-resolution content. ViXS’ XCodePro 300 family is ideal for
Ultra HD 4K infrastructure equipment, and the XCode 6000 family of
system-on-chip (SoC) products achieve unprecedented levels of
integration that enable manufacturers to create cost-effective
consumer entertainment devices.
ViXS is headquartered in Toronto, Canada with offices in Europe,
Asia and North America. VIXS™, the ViXS® logo, XCode®, XCodePro™
and Xtensiv™ are trademarks and/or registered trademarks of ViXS.
Other trademarks are the property of their respective owners. For
more information on ViXS, visit our website: www.vixs.com.
Safe Harbor Statement
This release contains forward-looking statements, including,
without limitation, statements with respect to the expected timing
of the closing, Pixelworks’ expectations with respect to the impact
of the transaction, including as to its patent portfolio, product
offerings, the diversification of revenue, scale and R&D,
product and solution opportunities, and that the transaction will
expand ViXS’ OTA platform and be accretive to Pixelworks’ full year
2018 earnings and earnings per share and deliver meaningful value
to the customers and stakeholders of Pixelworks and ViXS, as well
as Pixelworks’ belief that the transaction will strengthen its
position in the market, add complementary technology and product
offerings and accelerate Pixelworks’ development of comprehensive
end-to-end visual streaming solutions, within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements may be identified by use of terms such as “begin,”
“continue,” “will,” “believe,” “expect” and similar terms or the
negative of such terms. All statements other than statements of
historical fact are forward-looking statements for purposes of this
release, including any projections of revenue or other financial
items or any statements regarding the plans and objectives of
management for future operations. Such statements are based on
management's current expectations, estimates and projections about
Pixelworks’ business. These statements are not guarantees of future
performance and involve numerous risks, uncertainties and
assumptions that are difficult to predict. Actual results could
vary materially from those contained in forward-looking statements
due to many factors, including, without limitation: risks related
to the pending acquisition of ViXS, including our ability to
complete and to realize the anticipated benefits of the transaction
in a timely manner or at all, and to successfully integrate ViXS’
business with Pixelworks, the timing of completion of the
transaction, costs associated with the transaction, and the
potential impact of the transaction, or announcement thereof, and
reaction thereto, on our business, operating results and financial
condition; our ability to deliver new products in a timely fashion;
our new product yield rates; changes in estimated product costs;
product mix; supply of products from third-party foundries; failure
or difficulty in achieving design wins; timely customer transition
to new product designs; competitive factors, such as rival chip
architectures, introduction or traction by competing designs, or
pricing pressures; risks related to licensing our intellectual
property; the success of our products in expanded markets; current
global economic challenges; levels of inventory at distributors and
customers; changes in the digital display and projection markets;
changes in customer ordering patterns or lead times; seasonality in
the consumer electronics market; our efforts to achieve
profitability from operations; insufficient, excess or obsolete
inventory and variations in inventory valuation; the outcome of any
litigation related to our intellectual property rights; and our
limited financial resources and our ability to attract and retain
key personnel. More information regarding potential factors that
could affect Pixelworks’ financial results and could cause actual
results to differ materially is included from time to time in
Pixelworks’ Securities and Exchange Commission filings, including
its Annual Report on Form 10-K for the year ended December 31, 2016
as well as subsequent SEC filings.
The forward-looking statements contained in this release speak
as of the date of this release, and Pixelworks does not undertake
any obligation to update any such statements, whether as a result
of new information, future events or otherwise.
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Pixelworks, Inc.Investor ContactShelton GroupBrett Perry,
+1-214-272-0070bperry@sheltongroup.comorCompany ContactSteven
Moore, +1-408-200-9221smoore@pixelworks.comorViXS Systems,
Inc.Charlie Glavin, +1-416-646-2000 x227 or
+1-415-806-7715cglavin@vixs.com
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