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Feb 1st, 2011
DALSA acquisition lets us look at the MEMS world differently
DALSA was acquired by Teledyne in an all cash deal for $18.25 a share for a total of $341.0 million.
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DALSA, established in 1980, based in Waterloo Ontario Canada has 1,000 employees, including 400 at its semiconductor foundry in Bromont, near Montreal. It had annual sales of $200.0 million with an EBITDA of $34.3 million and Net Income of $12.9 million giving it a Price-to-Sales ratio on the deal of 1.7. In Q3:10 DALSA reported sales of $55.3 million with digital imaging representing $38.4 million with a net income of $4.2 million and its semiconductor business representing $16.9 million with a net income of $0.6 million including MEMS related revenue of $8.0 million. Teledyne, established in 1960, based in Thousand Oaks California, has 8,100 employees. It had TTM sales of $1.7 billion with an EBITDA of $225.3 million and a net income of $116.1 million. In the past ten years Teledyne has made 34 acquisitions with a combined value of $950.0 million.

There are many options for growing a company. Integrated companies are generally looking at two options to develop themselves in new areas. They can start building new competencies from scratch, but it generally takes a lot of time and money. Or they can simply buy it.

In line with the company history, Teledyne has chosen the second option when acquiring DALSA.

Technology acquisition of uncooled infrared technologies seems to be the major motivation for this transaction. Indeed Teledyne has a strong position in infrared imaging for high-performance markets. DALSA has complementary competences with visible CCD and CMOS cameras and extensive developments in innovative infrared technologies since several years (in particular uncooled microbolometers based on MEMS).

However Yole thinks that this is only a short-term motivation for the deal. Indeed Teledyne wants to specialize in high-performance electronics products. If some MEMS developments can immediately help with the infrared business, Teledyne will probably see MEMS devices proliferate in many business units later on. There are many opportunities of collaboration between both organizations, their hardest task will be to set the priorities!

Teledyne already had a first level of involvement in semiconductors and MEMS (in particular RF-MEMS switches). Until now most of the work of Teledyne in semiconductor, MEMS (and some imaging development as well) was in the Teledyne Scientific & Imaging, LLC division. DALSA capabilities will clearly enhance Teledyne presence in those areas. With this transaction, DALSA could be used by Teledyne as an internal semiconductor lab and fab, which could benefit to numerous Teledyne divisions.

Although we note that the continuously growing MEMS foundry activity represents less than 20% of DALSA revenue, MEMS becomes a strategic technology in many high-performance industries. DALSA MEMS foundry revenue makes them the largest independent MEMS foundry worldwide (Yole MEMS Company ranking 2010) and DALSA has great customers like InvenSense. This activity is quite far from Teledyne usual business model which is more focused on products rather than services. It will thus be very interesting to see the evolution of the MEMS foundry part of DALSA, which now has the possibility to work with its parent company in addition to the external customers. Probably both will be needed to move effectively to the next stage of the company development. DALSA will clearly continue to work with external customers and do business as usual. Teledyne projects will be additional developments and will not be in competition with the external customers, the device manufacturers. The high valuation also means that DALSA will have more financial support to expand its capacities, which is good. Finally we could also expect major changes in other MEMS foundry in the coming months: new market and strategy evolutions can be expected.

Extract of Teledyne Investor Presentation, October 2010. We can see that in this example Teledyne Defence Electronics Products. Yole thinks that future generations of such products can potentially benefit from MEMS developments (microbolometers but also RF MEMS phase shifters, inertial sensors for navigation or guidance…)

 Laurent Robin, Market Analyst, Yole Développement



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