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ACQUISITIONS | 6 Months Ended
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Mar. 29, 2024
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | ACQUISITIONS RF Business of Wolfspeed, Inc.— On December 2, 2023, we completed the acquisition of certain assets and specified liabilities of the radio frequency (“RF”) business of Wolfspeed, Inc. (“Wolfspeed”) (the “RF Business,”), which was accounted for as a business combination (the “RF Business Acquisition”). The RF Business includes a portfolio of gallium nitride (“GaN”) on Silicon Carbide (“SiC”) products used in high-performance RF and microwave applications. In connection with the RF Business Acquisition, we expect to assume control of a wafer fabrication facility in Research Triangle Park, North Carolina (the “RTP Fab”) approximately two years following the closing of the RF Business Acquisition (the “RTP Fab Transfer”). Prior to the RTP Fab Transfer, Wolfspeed will continue to operate the facility and supply wafer product and other fabrication services to us pursuant to various agreements entered into between the parties concurrently with the closing of the RF Business Acquisition. The purchase price for the RF Business Acquisition consisted of $75.0 million payable in cash, subject to customary purchase price adjustments, and 711,528 shares of our common stock, with a fair value of $57.7 million, which were issued at the closing of the RF Business Acquisition. The shares of our common stock issued in connection with the RF Business Acquisition are subject to restrictions on the sale of shares until transfer of the RTP Fab to the Company is complete. In addition, if the RTP Fab has not transferred by the fourth anniversary of the closing date of the RF Business Acquisition, Wolfspeed will forfeit 25% of the share consideration. We funded the cash purchase price for the RF Business Acquisition through cash-on-hand. During the three and six months ended March 29, 2024, we incurred acquisition-related transaction costs of approximately $0.3 million and $7.4 million, respectively, which are included in selling, general and administrative expense. During the three and six months ended March 31, 2023, we incurred acquisition-related transaction costs of approximately less than $0.1 million, which are included in selling, general and administrative expense. The following table summarizes the preliminary estimate of the purchase price (in thousands, except shares and closing share price amount):
|  |  |  |  |  | At Acquisition Date as Reported December 29, 2023 | Measurement Period Adjustments | At Acquisition Date as Reported March 29, 2024
Cash purchase consideration |  |  |  |  |  | $ | 75,000 |  | $ | — |  | $ | 75,000 |
Number of shares of MACOM common stock issued at closing |  |  |  |  | 711,528 |  |  |  |
Fair value of shares issued |  |  |  |  | $ | 81.14 |  |  |  |
Equity purchase consideration |  |  |  |  |  | 60,772 |  | (3,039) |  | 57,733 |
Total purchase consideration |  |  |  |  |  | $ | 135,772 |  | $ | (3,039) |  | $ | 132,733 |
During the six months ended March 29, 2024, we reduced the fair value of our common stock issued at the closing of the RF Business Acquisition by $3.0 million, representing the discount for lack of marketability as the shares were unregistered. The purchase price for the RF Business Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
|  |  |  |  | At Acquisition Date as Reported December 29, 2023 | Measurement Period Adjustments | At Acquisition Date as Reported March 29, 2024
Current assets |  |  |  |  | $ | 160 |  | $ | (121) |  | $ | 39 |
Inventory |  |  |  |  | 23,574 |  | 6,358 |  | 29,932 |
Property and equipment |  |  |  |  | 35,415 |  | — |  | 35,415 |
Intangible assets |  |  |  |  | 60,000 |  | (17,000) |  | 43,000 |
Prepayment for net assets associated with the RTP Fab Transfer |  |  |  |  | 19,450 |  | 500 |  | 19,950 |
Other non-current assets |  |  |  |  | 6,735 |  | (1,101) |  | 5,634 |
Goodwill |  |  |  |  | — |  | 8,584 |  | 8,584 |
Total assets acquired |  |  |  |  | 145,334 |  | (2,780) |  | 142,554 |
Current liabilities |  |  |  |  | 6,474 |  | 159 |  | 6,633 |
Long-term liabilities |  |  |  |  | 3,088 |  | 100 |  | 3,188 |
Total liabilities assumed |  |  |  |  | 9,562 |  | 259 |  | 9,821 |
Purchase Price |  |  |  |  | $ | 135,772 |  | $ | (3,039) |  | $ | 132,733 |
Intangible assets consist of technology, a favorable contract and customer relationships with fair values of $21.5 million, $14.5 million and $7.0 million, respectively, and useful lives of 4.8 years, 2.0 years and 8.8 years, respectively. We used variations of income approaches with estimates and assumptions developed by us to determine the fair values of technology, customer relationships and the favorable contract. We valued technology by using the relief-from-royalty method, customer relationships by using the multi-period excess earnings method and the favorable contract by using the discounted cash flow method. We valued backlog using the multi-period excess earnings method and determined that the value for backlog is zero. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, royalty rates, operating margin and discount rates. We used the cost and market approaches to determine the fair value of our property and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets. During the three months ended March 29, 2024, based on additional information, we updated inputs and assumptions used to calculate the fair value of certain assets and liabilities, primarily resulting in a decrease to the fair value of intangible assets of $17.0 million, an increase to the fair value of inventory of $6.4 million, with an offsetting increase to Goodwill. Due to these adjustments, the statement of operations for the three months ended March 29, 2024 includes a net benefit of $0.1 million for intangible asset and inventory step-up amortization related to the quarter ended December 29, 2023. The prepayment of $20.0 million for the net assets associated with the RTP Fab Transfer, classified in Other long-term assets in our condensed consolidated balance sheet, relates to the estimated fair value of property and equipment, inventory and liabilities that we will assume control of at the time of the RTP Fab Transfer. The cost and market approaches were used in determining the fair value of $14.1 million for property and equipment expected to transfer at the RTP Fab Transfer date. The remaining prepayment relates to inventory and liabilities, net, that we will assume control of at the time of the RTP Fab Transfer. The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of March 29, 2024, the purchase price allocation for the RF Business remains open as we gather additional information regarding the fair value of consideration transferred, the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, inventory, property and equipment, leases, the prepayment for the assets and liabilities to be conveyed with the RTP Fab Transfer and contingencies. The RF Business has been included in our consolidated financial statements since the date of acquisition. During the three and six months ended March 29, 2024, the RF Business contributed approximately $35.7 million and $41.9 million of our total revenue, respectively. The RF Business did not materially impact our consolidated net income for the three and six months ended March 29, 2024. Consolidated estimated pro forma unaudited revenue and net income as if the RF Business Acquisition had occurred on October 1, 2022, is as follows (in thousands):
| Three Months Ended |  | Six Months Ended
| March 29, 2024 |  | March 31, 2023 |  | March 29, 2024 |  | March 31, 2023
Consolidated estimated pro forma unaudited revenue | $ | 181,234 |  |  | $ | 205,610 |  |  | $ | 365,219 |  |  | $ | 428,060 |
Consolidated estimated pro forma unaudited net income (loss) | $ | 15,222 |  |  | $ | (1,566) |  |  | $ | 1,297 |  |  | $ | (32,842) |
Pro forma revenue and net income (loss) was prepared for comparative purposes only and is not indicative of what would have occurred had the acquisition actually occurred on October 1, 2022, or of the results that may occur in the future. Pro forma net income (loss) includes business combination accounting effects from the RF Business Acquisition, primarily amortization expense from acquired intangible assets, acquisition transaction costs and tax-related effects. Pro forma earnings for the three and six months ended March 29, 2024 were adjusted to exclude transaction costs incurred of $0.3 million and $15.8 million, respectively, and pro forma earnings for the three and six months ended March 31, 2023 were adjusted and include $3.1 million and $42.0 million, respectively, of transaction costs associated with the RF Business Acquisition. MESC— On May 31, 2023, we completed the acquisition of the key manufacturing facilities, capabilities, technologies and other assets and certain specified liabilities of OMMIC SAS, a semiconductor manufacturer based in Limeil-Brévannes, France with expertise in wafer fabrication, epitaxial growth and monolithic microwave integrated circuit (“MMIC”) processing and design. We are referring to this acquisition as the MACOM European Semiconductor Center Acquisition (the “MESC Acquisition”) and it was accounted for as a business combination. We completed the MESC Acquisition to expand our European footprint and to enable us to offer higher frequency gallium arsenide (“GaAs”) and GaN MMICs. Total cash consideration paid for the MESC Acquisition was approximately $36.9 million and was funded with cash-on-hand. During the three months ended March 29, 2024, we did not incur any acquisition-related transaction costs. During the six months ended March 29, 2024, we incurred acquisition-related transaction costs of approximately $0.3 million, which are included in selling, general and administrative expense. During the three and six months ended March 31, 2023, we incurred acquisition-related transaction costs of approximately $0.9 million and $1.6 million, respectively, which are included in selling, general and administrative expense. The purchase price for the MESC Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
|  |  |  |  | At Acquisition Date as Reported March 29, 2024
Current assets |  |  |  |  | $ | 297 |
Inventory |  |  |  |  | 3,790 |
Property and equipment |  |  |  |  | 30,538 |
Intangible assets |  |  |  |  | 5,966 |
Total assets acquired |  |  |  |  | 40,591 |
Current liabilities |  |  |  |  | 3,734 |
Total liabilities assumed |  |  |  |  | 3,734 |
Purchase Price |  |  |  |  | $ | 36,857 |
As part of the acquisition, we assumed a lease agreement for manufacturing facilities in France that provides us with the option to purchase the real property for an immaterial price at the end of the lease term, in October 2024. We expect to exercise this bargain purchase option and have recorded a right-of-use-asset of $24.7 million in Property and equipment. The real property was valued using a market approach. Intangible assets consist of technology and customer relationships of $4.9 million and $1.1 million, respectively, and both having useful lives of 8.3 years. We used the income approach to determine the fair value of the definite-lived intangible assets and the cost and market approaches to determine the fair value of our property, plant and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets. The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of March 29, 2024, the purchase price allocation for the MESC Acquisition remains open as we gather additional information regarding the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, inventory, property and equipment, leases, liabilities and contingencies. We did not recognize goodwill associated with this acquisition and there were no measurement period adjustments recognized during the quarter ended March 29, 2024. Linearizer Technology, Inc.— On March 3, 2023, we completed the acquisition of Linearizer Technology, Inc. (“Linearizer”), a developer of modules and subsystems, including SSPAs, microwave predistortion linearizers and microwave photonics based in Hamilton, New Jersey (the “Linearizer Acquisition”), which was accounted for as a business combination. We acquired Linearizer to further strengthen our component and subsystem design expertise in our target markets. In connection with the Linearizer Acquisition, we acquired all of the outstanding shares of Linearizer for total cash consideration of approximately $51.4 million. We funded the Linearizer Acquisition with cash-on-hand. During the three and six months ended March 29, 2024, we did not incur any acquisition-related transaction costs. During the three and six months ended March 31, 2023, we incurred acquisition-related transaction costs of approximately $1.9 million, which are included in selling, general and administrative expense. The Linearizer Acquisition was accounted for as a business combination and the operations of Linearizer have been included in our consolidated financial statements since the date of acquisition. We finalized the Linearizer Acquisition purchase accounting during the fiscal quarter ended March 29, 2024. The final purchase price has been allocated as follows (in thousands):
| At Acquisition Date as Reported September 29, 2023 |  | Measurement Period Adjustments |  | At Acquisition Date as Reported March 29, 2024
Current assets | $ | 2,819 |  |  | $ | (100) |  |  | $ | 2,719 |
Inventory | 8,907 |  |  | 1,407 |  |  | 10,314 |
Property and equipment | 5,485 |  |  | — |  |  | 5,485 |
Intangible assets | 29,600 |  |  | — |  |  | 29,600 |
Goodwill | 12,332 |  |  | (1,494) |  |  | 10,838 |
Total assets acquired | 59,143 |  |  | (187) |  |  | 58,956 |
Current liabilities | 7,544 |  |  | — |  |  | 7,544 |
Total liabilities assumed | 7,544 |  |  | — |  |  | 7,544 |
Purchase Price | $ | 51,599 |  |  | $ | (187) |  |  | $ | 51,412 |
Intangible assets consist of customer relationships, technology and trade name with fair values of $20.7 million, $7.1 million and $1.8 million, respectively, and useful lives of 8.6 years, 7.6 years and 7.6 years, respectively. We used the income approach to determine the fair value of the definite-lived intangible assets and the cost and market approaches to determine the fair value of our property, plant and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets. The intangible assets and goodwill acquired will be amortizable for tax purposes due to the Internal Revenue Code of 1986 (IRC) Section 338 election filed.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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