Wireless technology and computer chip company CSR powered to a 52-week high as it announced the sale of its handset connectivity technology business to Korean technology giant Samsung, paving the way for the return of a pile of cash to shareholders.
CSR plans to return up to $285m to shareholders after sealing a deal with Samsung which will see the transfer to the Korean firm of CSR's phone handset operations for a consideration of $310m in cash.
Samsung will get the UK company's handset connectivity technology and a significant proportion of the resources dedicated to the development of handset location technology, including 21 US patents which will be licensed back to CSR in perpetuity on a royalty-free basis.
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CSR will retain its existing handset connectivity and location products and the associated revenue, together with rights to use future connectivity and location technology, such as CSR9800, in areas other than handsets and mobile devices.
In addition, Samsung is taking a 4.9% stake in CSR at a cost of $34.4m, which works out at 223p per share.
"The transaction immediately increases CSR's focus on its five high growth markets of Voice & Music, Automotive Infotainment, Indoors Location, Imaging and Bluetooth Smart; accelerates its higher margin platform strategy and improves CSR's overall market position," the CSR statement said.
Net proceeds are expected to be $209m after estimated tax costs and various other expenses. The Cambridge-based company said the deal is expected to boost earnings per share in 2013 even before the return of capital, and to "be strongly accretive" after the return of capital. CSR said the return of capital will probably be effected by a tender offer for shares.
In 2011, the underlying operating costs associated with the handset operations to be transferred to Samsung were $46.6m. After getting shot of the handset operations, CSR expects its underlying operating costs will be in the range of $390m to $410m on an annualised basis by the end of 2012. This is after taking into account the previously announced annualised costs savings of $130m by the end of the second quarter of 2012. This compares with the current guidance for an estimated underlying operating cost base of $420m to $430m on an annualised basis for the second half of 2012.
"This transaction will accelerate our transformation into a higher gross margin platform company operating in attractive growth markets where we have a leading market position. As a result, we will be a more competitive, more differentiated and more profitable business," said Joep van Beurden, Chief Executive Officer of CSR.
As for Samsung, the deal enables it to get its hands on more patents as it continues its worldwide battle with the likes of Apple to be king of the electronic gizmos market.
Commenting on current trading, CSR said the second quarter of 2012 was a good one, and revenues are expected to be towards the top end of the previously announced guidance range of $260m to $280m.
"CSR remains cautious with respect to order patterns for the second half of the year and CSR currently expects third quarter 2012 revenues to be in the range $260m to $280m," the statement said. Notwithstanding the above, the company remains on track to deliver market consensus revenue estimates for the full year.
Shares soared as high as 314.4p in the first hour of trading, up from 228.3p overnight, before pulling back a little.
JH
