Chip Maker Agere Said Buying Start-Up Modem-Art For $145M

NEW YORK (Dow Jones)--Communications chip maker Agere Systems Inc. (AGRA) is in the final stages of negotiations to acquire Israeli start-up Modem-Art Ltd. for $145 million in cash and stock, according to a source close to the situation.

The deal is expected to be completed in less than two weeks.

Mobile handset chip maker Modem-Art didn't return requests for comment.

Yair Shoham, partner at Genesis Partners and board chairman of Modem-Art, said in an e-mail: "Although we are the largest shareholder of [Modem-Art]...we do not comment on stories regarding our companies prior to the completion of a reportable event."

Agere spokeswoman Joanna Schooler said the company does not comment on rumors or speculation.

The source says the deal represents one of the largest distributions to limited partners in Israel in the past four years, with Modem-Art's investors potentially making a fivefold return on investment.

The two largest shareholders in Modem-Art are Genesis Partners and Tamir Fishman Ventures. When the deal is completed, Tamir Fishman Ventures will chalk up its first exit since it was founded.

Other investors in the company include entrepreneur Gideon Barak, Ampal American Israel Corp., Argoquest Holdings, BancBoston and Apax Partners. Modem-Art has raised approximately $25 million in three rounds of financing, most recently closing an $8.4 million Series C in September.

Founded in 1998 and based in Raanana, Israel, Modem-Art is a fabless semiconductor company that develops programmable chips for third generation, or 3G, wireless broadband telecommunications. The chips are for handsets that operate on W-CDMA technology and represent the brains of the mobile handset.

Agere, formerly the microelectronics division of telecommunications equipment giant Lucent Technologies Inc. (LU), is a publicly traded company that makes electronic components for communications networks and integrated circuits for use in communications and computer equipment. For the fiscal first quarter ended Dec. 31, Agere reported a loss of $67 million, on revenue of $410 million.

(VentureWire, published by Dow Jones Newsletters, covers venture capital and high-tech start-ups.)

-By Rizal Tupaz, Dow Jones Newsletters/VentureWire, 201-938-2345; rizal.tupaz@dowjones.com

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Posted to the site on 11th February 2005