Silver Lake Buys Smart Modular

Buyout shop Silver Lake Partners will acquire Smart Modular Technologies in a cash deal that values the company at roughly $645 million, Reuters reported. Smart Modular is a maker of memory chips. Silver Lake and its unit Silver Lake Sumeru will pay $9.25 for each Smart Modular share, a premium of 13% over the chipmaker’s Monday close. Silver Lake has roughly $14 billion under management.

(Reuters) – Smart Modular Technologies Inc agreed to be taken private by buyout firm Silver Lake Partners in a cash deal that values the memory chipmaker at about $645 million.

“They were acquired due to their leadership for memory modules in Brazil, which remains a relatively hot market for PCs,” Avian Securities analyst Win Cramer told Reuters.

Global technology companies are picking up acquisition targets in Brazil to take advantage of explosive growth in family income and jobs as well as growing interest in online commerce and mobility solutions.

Last September, Silver Lake, a technology-focused private equity firm with investments in Internet video and telephone service Skype and online gaming group Zynga, among others, bought a minority stake in Brazilian Web hosting company Locaweb.

Smart Modular, which gets most of its revenue from Brazil and the United States, said in December that it expects its enterprise solid state storage (SSD) and Brazil flash business initiatives to drive the business.

The deal will give Smart Modular the freedom to aggressively invest in its emerging enterprise SSD business, Wedbush Securities analyst Betsy Van Hees said.

The market for SSDs, which are faster and more rugged than hard drives, is growing as data center managers look for ways to retrieve information faster, especially for applications like video streaming.

The company’s SSD platform has been gaining traction at tier one OEMs, with design wins at IBM and another yet-to-be-named customer, analyst Cramer said.

Silver Lake, which has about $14 billion in assets under management, and its unit Silver Lake Sumeru will pay $9.25 for each Smart Modular share, a premium of 13 percent to the chipmaker’s Monday close.

The private equity firm declined to provide more details on the deal.

In October, Reuters reported had quoting sources that Silver Lake was one of the parties involved in the discussions with hard drive maker Seagate Technology for a buyout.

Smart Modular said a special committee of the board will evaluate alternative proposals through June 9.

Barclays Capital is serving as financial adviser for the deal, which is expected to close in the third quarter.

The deal has debt financing commitments from J.P. Morgan and UBS Investment Bank and some of their affiliates, the company said.

Newark, California-based Smart Modular’s shares, which have gained about a fourth in the last three months, were trading up $1.04 at $9.23 on Tuesday on Nasdaq. They touched a high of $9.26 earlier in the day.

More than 17 million shares changed hands by 1300 ET, about 17 times their average daily volume. (By Swati Chitnis; Reporting by Swati Chitnis; Editing by Ian Geoghegan and Unnikrishnan Nair)