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HYDERABAD, March 20

MOSCHIP Semiconductor Technology Ltd is set to acquire the Silicon Valley-based Verasity Technologies Inc in an all-stock deal aimed at broadbasing the range of semi-conductors in the company's portfolio.

The board of directors, which met here on Thursday, approved the amalgamation of Verasity , a system on chip (SoC) semiconductor company, which is valued at $4.3 million by global consultants PricewaterhouseCoopers (PwC). The amalgamation of Verasity will be in accordance with the provisions of the Companies Act, and subject to the approvals by the Foreign Investment Promotion Board and the Reserve Bank of India. The acquisition will also require the approval of the respective companies' shareholders.

At a press conference addressed by the top brass of Moschip and Verasity here after the board meeting, the Chairman and CEO of Moschip, Mr K. Ramachandra Reddy, and the President of Verasity, Mr Raymond Brinks, said the acquisition and consequent merger of the US company will bring in significant synergies and expand the product portfolio.

Following this development, the shareholders of Verasity will be issued 6,177,778 equity shares of Moschip at an exchange ratio of one share of Moschip for every one share of Verasity. The valuation has been determined on the basis of a valuation of both the companies by the PwC. This move will increase the equity of Moschip from Rs 23.22 crore to Rs 29.40 crore, Mr Vivek Bhargava, Chief Financial Officer of Moschip, said.

Giving a financial outlook in the post-merger scenario, Mr Reddy said the company expects to earn consolidated revenue of $12-14 million in the next financial year and $31-34 million in 2004-2005. While the product launches have been delayed due to compatibility and other technical issues, about eight new products from Moschip design house will be rolled out in the next three months.

The CFO said the company was in the process of raising about $2 million to finance the product development expenditure and working capital requirements for both the businesses. Towards this, we are in parleys with financial institutions, both domestic and overseas and expect to conclude the process in the next two-three months, he said.

Verasity, a privately held corporation, provides silicon, software and support for last mile Internet connected security solutions. The company is eyeing the huge opportunity in security space and the focus is on virtual private networks and the firewall segment. The company has developed a Secure Ethernet Chip, scheduled for sampling in June 2003, according to Mr Brinks.

The main founding members of Verasity Technologies — Mr Gary Kennedy and Mr Ray Brinks — will hold 3 per cent and 9 per cent of equity respectively in Moschip.

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