Novafora, a startup that promises to design “revolutionary” digital video processors suitable for various devices, on Monday announced that it would acquire Transmeta Corp., a designer of low-power microprocessors that failed to become popular on the market and could not keep their development going forward.

Transmeta is set to be acquired by Novafora for $255.6 million in cash, subject to certain working capital and other adjustments. Under the terms of the agreement, and based on current estimates of Transmeta's future working capital and other adjustments at the effective time of the merger, stockholders are expected to receive between $18.70 and $19.00 for each outstanding share of Transmeta's common stock.

The agreement provides, among other things, that Transmeta may not enter into any future licensing transaction prior to closing of the merger without Novafora's consent. The acquisition is expected to close in the first quarter of 2009. After the closing of the merger, Transmeta's common stock will cease to trade.

"We are pleased with the value that we will be able to return to our stockholders as a result of this acquisition agreement with Novafora. We believe the deal is a win for all our stockholders. We have spent the past several months extensively exploring our strategic options and believe that the agreement with Novafora best serves the interest of our stockholders," said Les Crudele, president and chief executive officer of Transmeta.

The reasons why Novafora, which is controlled by two venture capital firms, decided to take over Transmeta are not completely clear. Novafora was founded in 2004 and none of its products have been released commercially so far, hence, the timeline to acquire another company may not be the best to say at least. Novafora claims that it wants to acquire Transmeta in order to get power-saving technologies as well as employees, though, such reasons do not seem to be truly crucial: the company could license the technologies and hire employees without making such a huge investment.

"Transmeta's innovative technology and the expertise of its employees are valuable additions to Novafora. Adding Transmeta's power management technology to our video processor will advance our vision of making our products applicable across the broadest range of video-oriented devices," said Zaki Rakib, chief executive of Novafora.

It should be kept in mind that with acquisition of Transmeta, Novafora company gains experience in central processing units’ design along with code-morphing software, something that seems to be at least as valuable as power-saving technologies. Besides, Transmeta signed cross-license agreements with various companies after it decided to quit the market of CPUs several years ago.

Tags: Transmeta, Novafora