NEWS

DTS To Buy SRS Labs For About $134 Million

April 18, 2012

DTS Inc. will buy fellow audio technology company SRS Labs Inc. in a cash-and-stock deal worth about $134.3 million. Shares of Santa Ana, Calif.-based SRS surged more than 37 percent on the news Tuesday. DTS, based in Calabasas, Calif., said the addition of SRS will boost its range of audio processing technologies and give it one of the broadest portfolios of audio-related intellectual property in the industry, with over 1,000 registered and pending patents and trademarks. The company expects the deal to boost its profits by 2013 and provide it with at least $8 million in annual cost savings. For the fiscal year ended Dec. 31 the combined company would have posted about $129.8 million in revenue, DTS said. Under the terms of the deal, SRS shareholders can choose to receive either $9.50 per share in cash or 0.31127 shares of DTS common stock for each of their SRS shares, subject to proration and adjustment. The cash offer represents a 38 percent premium over SRS' Monday closing stock price of $6.86. DTS said that it based its calculations on a stock price of $30.52, which was the company's Thursday closing stock price and would value the stock at about $9.50 per SRS share. DTS said its payment for SRS' shares will be equally split between cash and stock. Based on the company's about 14.32 million shares outstanding and DTS' Monday closing stock price, the deal is worth about $134.3 million in cash and stock. The companies valued the deal at about $148 million, including acquired net cash of about $38 million. DTS said it plans to finance the cash portion of the deal with a combination of existing cash and a new credit facility. The deal has been approved by boards of both companies, but remains subject to SRS shareholder and regulatory approval. Thomas C.K. Yuen, SRS' president, chairman and chief executive, along with some of his family and affiliates, who together hold about 20 percent of SRS' outstanding shares, have agreed to vote their shares in favor of the deal, the companies said. DTS said it expects the deal to close in the third quarter of this year. When it does, Yuen is expected to join the DTS' board, the company said. In heavy afternoon trading, SRS shares rose $2.53, or 37 percent, to $9.39, after peaking at $9.50 earlier in the day. DTS shares rose 71 cents, or 2.4 percent, to $30.46.

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