Lattice Semiconductor sold to firm with ties to China

Portland’s biggest tech company, Lattice Semiconductor, sold Thursday to an obscure California investment firm that says its funding comes from China.

Canyon Bridge Capital Partners said it will pay $1.3 billion for Lattice, or $8.30 per share. The offer represents a 30 percent premium over Lattice’s closing stock price Wednesday. Lattice’s shares shot up more than 18 percent on news of the deal, to $7.54.

That’s well below Canyon Bridge’s offer price, though, reflecting skepticism about whether the little-known investment firm will be able to complete the deal.

Susquehanna Financial Group analyst Christopher Rolland left his price target on Lattice at $7.50 despite the $8.30 offer, writing in a note to clients that he’s unsure Thursday’s deal will close given the uncertainty about Canyon Bridge’s ties to China and the firm’s track record.

Canyon Bridge did not immediately respond to an inquiry about its background, portfolio or funding.

Lattice’s sale would not be a surprise — the chip industry is undergoing a massive wave of consolidation — and the Portland company had topped the lists of takeover targets for more than a year. But the decision to sell to a unknown investment firm, instead of another chip company, is unexpected.

California-based Canyon Bridge could be looking for opportunities to improve Lattice’s results before putting it on the market again. Just last week, Rolland said that Lattice would be an attractive acquisition for Xilinx, Qualcomm, Marvell or even Apple, which apparently is already a Lattice customer.

On Thursday, though, Rolland told clients the Canyon Bridge deal faces uncertain prospects because of murky information around the investment firm. He noted that Canyon Bridge identifies its funding as coming from “limited partners in China.”

In his note, Rolland said he believes the Chinese government is seeking to buy chip companies in other countries to integrate with a Shanghai-based company, Semiconductor Manufacturing International Corp. Lattice would be a neat fit, he wrote, because its chips are made by contractor manufacturers based on older technology of the kind SMIC uses.

Additionally, Rolland said, Lattice is small enough, and its technology sufficiently low-tech, that a sale to Chinese investors would probably pass muster with United States regulators who review such deals for national security implications.

For its part, Lattice said Thursday it expects business as usual under its new ownership. Historically, the company has had about 200 employees in Oregon, split between its Portland office and its former headquarters in Hillsboro. Lattice employed 1,146 worldwide at the start of the year.

“Importantly, we will operate as a standalone subsidiary after the acquisition and do not expect any changes in our operations or our unwavering commitment to continued innovation for our customers,” Lattice chief executive Darin Billerbeck said in a written statement. The company told employees that its headquarters will remain in Portland.

Lattice is the smallest of three companies that dominate the market for a kind of chip called a field programmable gate array. The programmable chips play supporting roles in everything from telecommunications networking equipment to digital cameras and TVs.

Last year, Intel paid $16.7 billion for another programmable chip company, Altera. And Lattice had made deals of its own, paying $600 million last year for a California company called Silicon Image.

Lattice reported $406.0 million in revenue last year, up from $366.1 million in 2014, before the Silicon Image deal. Lattice lost $159.5 million in 2015, including $93 million in restructuring, accounting and acquisition-related expenses.

Founded in 1983 by alumni of Tektronix and Intel, Lattice literally trademarked the term “Silicon Forest.” It has never had an easy path, though.

Lattice filed for bankruptcy in 1987, revived the business, then withstood a formidable downturn following the dot-com crash. It endured an accounting scandal in 2004 and fired longtime CEO Cyrus Tsui a year later amid shareholder accusations of lavish corporate spending.

The company’s business rebounded somewhat in recent years by focusing on the low-end of the programmable chip business, but results were uneven and Lattice laid off workers in 2012 and twice last year.

The buyer, Canyon Bridge, has no public track record and its website identifies no other companies in its portfolio. The firm lists a Palo Alto address and two partners, including former Cadence Design Systems CEO Ray Bingham.

Lattice’s sale is the latest in a long string of deals for Oregon’s biggest tech companies. Earlier this year, Beaverton-based Cascade Microtech sold for $352 million and FEI Co. sold for $4.2 billion.

Wilsonville-based Mentor Graphics, the state’s largest pure tech company, is under pressure from investors and has reportedly hired an investment bank to put itself on the market.

All three of those companies serve the chip industry, which is consolidating as maturing businesses look to expand their markets and reduce costs by acquiring peers in related fields. Oregon tech, with no really big companies of its own, tends to be on the selling end of those transactions.