Entropic To Scoop Up Trident Set-Top Box Assets For $65M (Law360)

By Lance Duroni

Entropic Communications Inc. is positioned to buy bankrupt Trident Microsystems Inc.'s set-top box business for $65 million after winning an auction that drove up its initial bid by $10 million, Entropic said Monday.

The offer will go before a Delaware bankruptcy judge for final approval March 6, and Entropic expects the deal to close by the end of the first quarter of 2012.

"Our successful bid brings us closer to adding Trident's complementary assets, portfolio, research and development, and global presence to Entropic. We believe the acquisition brings inherent value to both organizations' customers, employees and partners, and we look forward to closing the transaction," Entropic CEO Patrick Henry said in a statement.

San Diego-based Entropic said it plans to offer jobs to 375 Trident employees in the deal.

California-based Trident and its subsidiary Trident Microsystems (Far East) Ltd. filed for court protection Jan. 4, with Entropic already lined up to acquire the set-top box assets with a stalking horse bid of $55 million. The company listed $310 million in total assets and $40 million in liabilities in its bankruptcy petition.

Trident designs, develops and markets integrated circuits and software for processing, displaying and transmitting audio, graphics and images in home consumer electronics products such as digital TVs.

At a court hearing Friday, Trident attorney Richard Chesley of DLA Piper said the auction was an "enormously successful process."

U.S. Bankruptcy Judge Christopher S. Sontchi noted at the hearing that the sale positions Trident's shareholders for a recovery in the case.

"In this situation, equity is in the ballgame, which is unusual," the judge said.

In documents supporting its bankruptcy petition, Trident cited increased pricing pressure from Taiwanese suppliers of system-on-a-chip semiconductors, which it said recently gained a greater share of the market, and elevated inventory levels in the industry due to a slowdown in consumer electronics market as factors that have forced the company to adjust prices, leading to lower margins.

"The combination of lower margins and sale volumes, high employee costs and limited access to new capital has significantly affected Trident's liquidity and ability to pay its debts as they become due," the company said.

Trident began a marketing effort before filing for bankruptcy in an attempt to find a possible buyer for the set-top business and that, after identifying Entropic, it believed that a quick sale would help it stop the drain on its cash balances and move forward, according to court documents.

Trident is represented by Cynthia E. Moh, Stuart M. Brown and Richard A. Chesley of DLA Piper.

Entropic is represented in the deal by Barbara Borden, Cathy Hershcopf, Robin Lee, Lois Voelz and Eric Kauffman of Cooley LLP.

The unsecured creditors are represented by Bruce Grohsgal, Debra Grassgreen, John D. Fiero, John W. Lucas and Peter J. Keane of Pachulski Stang Ziehl Young & Jones LLP.

The case is In re: Trident Microsystems Inc. et al., case number 1:12-bk-10069, in the U.S. Bankruptcy Court for the District of Delaware.

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Related Contacts
Lois Voelz Senior Counsel, Palo Alto
Barbara Borden Partner, San Diego
Cathy Hershcopf Partner, New York
Related Practices & Industries

Mergers & Acquisitions