PMC-Sierra Ups Ante in Battle for Hardware Supremacy

Burnaby, BC-based communications chip manufacturer PMC-Sierra, Inc. (PMC), Canada’s third most valuable technology company behind Nortel Networks Corp. and JDS Uniphase Corp., announced on March 3, 2000 that it was acquiring two privately held semiconductor start-ups, AANetcom and Extreme Packet Devices (Extreme), for a total of approximately US$1.38 billion worth of PMC stock.

PMC will buy US-based AANetcom, which designs and markets chips that prevent “traffic jams” in telecommunications equipment, for 4.8 million PMC shares, worth approximately US$965 million. The transaction has already received approval from AANetcom shareholders, and is to be treated as a pooling of interests transaction.

PMC will buy Kanata, Ont.-based Extreme, which makes chips used in switches and routers that manage video, voice and data traffic on high-speed networks, for about US$415 million worth of PMC stock. The deal is expected to close in late March, 2000 with the final number of shares to be set at that time.

The two deals, which represent 5 per cent of PMC’s outstanding equity, follow PMC’s other big buys in the last year, including the purchase of US-based chip manufacturer Abrizio Inc. for $427 million worth of PMC stock. The two new acquisitions will give greater depth and breadth to PMC’s product line, and will allow PMC to move in to new product areas. The deals will also give PMC valuable engineering talent as a number of the engineers at AANetcom are former employees of Lucent Technologies Inc.—a key competitor to PMC in the communications hardware market.

Blake, Cassels & Graydon LLP is Canadian counsel to PMC with a team led by Jocelyn Kelley and including Tamara Howarth and Paul Tamaki. US counsel to PMC is Wilson Sonsini Goodrich & Rosati with a team that includes Neil Wolff, James Murdock and James Jensen. Counsel to Extreme is LaBarge Weinstein with a team that includes Deborah Weinstein, Lawrence Weinstein, Prashant Watchmaker and Philip Byrne.