Patent licensing firm Tessera to buy audio equipment maker DTS for $850 mn

Patent licensing firm Tessera Technologies Inc yesterday struck a deal to buy audio equipment maker DTS Inc for about $850 million in cash.

Tessera is offering to pay $42.50 per share in cash, a 24-per cent premium to DTS's Monday close price.

Tessera, based in San Jose, California, said that it intends to fund the acquisition with a combination of available cash on hand and approximately $600 million of committed debt financing from RBC Capital Markets and the deal immediately add to its earnings per share and free cash flow.

The combined company will be renamed at the closing of the transaction - expected by late fourth quarter of 2016 or early first quarter of 2017.

The combined company expects to generate $15 million in annual cost synergies within the first 12-18 months following the closing of the transaction and about $450 million in pro forma revenue for 2016, nearly half of which will come from product licensing.

DTS specialises in digital surround sound used for both commercial / theatrical and consumer grade applications, as well as for mobile, home, and automotive markets.

One of its initial investors was film director Steven Spielberg, who used the company's theatrical sound formats in his 1993 production of Jurassic Park, which came slightly less than a full year after the official theatrical debut of Dolby Digital in Batman Returns. Jurassic Park also became the first home video release to contain DTS sound when it was released on LaserDisc in 1997.

Founded in 1990 Tessera is a technology company that licenses technology and intellectual property to customers and others who implement it for use in areas such as mobile computing and communications, memory and data storage, and 3-D Integrated Circuit technologies, among others.

Tessera has licensed its chip packaging technology to several chip manufacturers, including Intel and Samsung Electronics.

''Our acquisition of DTS's talented team and industry-leading products will represent a transformational step in the execution of Tessera's strategic vision, with exciting new product development and marketing opportunities,'' said Tom Lacey, Tessera CEO.

''Our complementary technology portfolios are ideally suited to deliver the next generation of audio and imaging solutions to mobile, consumer electronics, and automotive markets while expanding our ability to address incredible new opportunities in IoT and AR/VR,'' he added.