Genesis Microchip and Pixelworks to merge

Genesis Microchip and Pixelworks, manufacturers of ICs for displays, are to merge in a stock swap worth $600 million.

Under the terms of the agreement, unanimously approved by both Boards of Directors, Pixelworks will issue 2.3366 shares of Pixelworks common stock for each outstanding share of Genesis Microchip common stock and will issue Pixelworks stock options for Genesis stock options based on the same exchange ratio.

Based on Pixelworks’ closing stock price of $7.65 per share on March 14, 2003, the transaction is valued at approximately $600 million. Following the transaction, Genesis Microchip’s shareholders will own approximately 62.5% and Pixelworks shareholders 37.5% of the merged company, on a fully diluted basis.

The combined company expects the transaction to be accretive to Pixelworks’ earnings per share on a pro forma basis in the first full quarter of combined operations, excluding merger-related and other charges. The management of Genesis Microchip and Pixelworks currently anticipate operating cost synergies of approximately $4 million per quarter, post integration.

The Board of Directors of the combined company will consist of four directors from Genesis Microchip and four directors from Pixelworks. One additional director will be designated by Pixelworks directors, subject to reasonable acceptance by Genesis Microchip directors.

The merged entity, incorporated in Oregon, will have its headquarters in Alviso, CA, and retain a significant presence in Pixelworks’ current headquarters in Tualatin, OR.

Subject to shareholder approvals and other customary closing conditions, the transaction is expected to close in the third quarter of calendar 2003.