Conexant Systems Inc. (CNXT) recently announced that Oppenheimer & Co. Inc, the underwriter for its recently concluded public offering of 7,000,000 shares, exercised its option to purchase an additional 1,050,000 shares. As a result of this exercise, Conexant was able to sell a total of 8,050,000 shares at a price of $2.85 per share. After deducting the underwriting discount and estimated offering expenses, Conexant received approximately $21.2 million from the allotment of the shares.
Conexant had earlier granted Oppenheimer & Co Inc a 30-day option to purchase up to 1,050,000 additional shares to cover over-allotments.
Conexant intends to use the net proceeds from the offering for general corporate purposes. Management has stated that the company will use all proceeds to strengthen its balance sheet by retiring debt. Conexant had already announced plans to retire $80 million in the aggregate principal amount of floating-rate senior secured notes due Nov. 2010. It will commence a tender offer for $73 million notes and intends to buy an additional $7 million of the notes.
As a result of this retirement of debt, Conexant will reduce its annual interest burden by more than $5 million. As of July 3, 2009, Conexant had a total debt of $422.1 million and cash and equivalents of $123.4 million.
While Conexant continues to face challenges with eroding sales in WLAN, a flattening ADSL market and declining revenue in its modem business, new management is making drastic changes to overhaul the company’s strategic positioning and return to profitability.
Headquartered in Newport Beach, California, Conexant Systems designs and develops semiconductor solutions that enable consumers to access the digital world. It operates in an intensely competitive market with many rivals in and outside the United States, including Analog Devices (ADI), Broadcom Corp. (BRCM) and Texas Instruments (TXN).
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