Concord Acquisition Corp III (CNDB) to Combine with GCT Semiconductor in $461M Deal
by Nicholas Alan Clayton on 2023-11-03 at 10:56am

Concord III (NYSE:CNDB) has entered into a definitive agreement to combine with fabless chipmaker GCT at an enterprise value of $461 million.

San Jose, California-based GCT manufactures 4G and 5G chips for telecom clients for uses in a variety of home internet, infrastructure and mobile phone applications.

The combined company is expected to trade on the NYSE under the symbol “GCTS” once the deal is completed in the first quarter of 2024.

Transaction Overview

Concord III currently has about $43 million in its trust having seen 88.3% of its shares redeemed through two extension votes that will now allow it to extend up to November 8, 2024.

It plans to supplement this with $43 million in PIPE and convertible note funding, but it has not yet filed its merger documents laying out the terms for this investment. Concord III’s profile page will be updated once this information is made available.

GCT shareholders are to be issued $310 million in shares and the company expects to have $62 million on its balance sheet at close, assuming no redemptions. $40.2 million in existing debt is to be rolled into the combined entity and it expects to foot $25 million in transaction costs.


Existing GCT shareholders are expected to own 64.3% of the combined entity with pubic Concord III shareholders taking an 8.4% stake and PIPE investors 16.3%. The SPAC’s sponsor would see its promote converted to an 11% stake, but it has also agreed to forfeit about 1,900,000 of its promote shares (22%) and 30% of private placement warrants.

Another 1,900,000 promote shares and 30% tranche of the sponsor’s 9,400,000 private warrants will be set aside to be used as sweeteners for outside capital investments.

GCT shareholders stand to earn up to 20,000,000 shares through an earnout that will make distributions at share price hurdles of $12.50, $15 and $17.50.

Concord III expects to nominate two members to the combined company’s Board.

Quick Takes: The parties have not yet released any financials with this deal, but there is little doubt that GCT is generating a fair amount of business.

They have been at the semiconductor game since 1998 and it has had LTE chips on the market since 2010. It now has 4G and 4G+ products in use by several telecoms including major US cellular providers Verizon (NYSE:VZ), Sprint and T-Mobile (NASDAQ:TMUS).

It expects to complete the development of its 5G chipset this year and begin shipping those products in volume in the second half of 2024. Some of its existing customers have already put in orders for the 5G line, but it has also added some newcomers to the rolls for this next generation of products.

Telecom de-SPAC Airspan (NYSE:MIMO) is among them, joined by Dish Network (NASDAQ:DISH) and Nokia (NYSE:NOK) among others. Ligado Networks hopped on last month to include GCT products in the satellite telecom builds it operates to serve phone and internet operators.

It has already become a preferred supplier for advanced 4G because Intel (NASDAQ:INTC) has primarily served this market, with the other two major suppliers both now under US sanctions aimed at easing the US tech industry’s reliance on Chinese manufacturing.

Most of GCT’s current deployments are within mobile internet routers, AI translation devices and smartphones, but it expects the 5G transition to open up more end customer possibilities.

Most of its workflow currently runs through ODMs and OEMs before becoming a part of an end product. That presents some advantages in this case, because the 5G market leaders all sell their own branded products and prefer to maintain the competitive edge in the consumer space rather than provide their advanced technology to competitors.

GCT could be come one of the independent 5G providers of choice if it can execute quickly on its current development plans.

The downside of having the level of remove that GCT has from the end product is that the margins it can pull from its portion of the build are limited. Nonetheless, its listed peer group trades appreciably well.

Fellow chipmaking de-SPACs Navitas (NASDAQ:NVTS) and Transphorm (NASDAQ:TGAN) trade at 15.5x and 9.3x current revenue, respectively, despite the fact that both continue to operate in the red.

Interestingly, these two de-SPACs have both logged far higher growth rates than the incumbent field with 102% year-on-year revenue growth in 2023 or Navitas and 14.8% for Transphorm. Meanwhile, a basket of eight other public competitors shrunk revenues at a median rate of -13.7% this year, according to GCT’s presentation.

But, with median margins in this group still high at 47.9%, they have continued to trade reasonably well at a median of 3.6x 2024E revenue and 11.2x 2024E EBITDA.

The stumbles of the wider group could be owing to industry-wide shortages and supply chain disruptions. And, none of it necessarily reflects directly upon GCT, which does not provide figures to compare with this field.

But, it does nonetheless paint a picture of a safer-than-average business to bring to market at this point in time.

Not only is demand expected to be steadily increasing for GCT’s products, but the market has been forgiving on questions of profitability and growth given how critical these products are expected to be over the medium term.

Click here for the full investor presentation.


  • Company
    • B. Riley Securities, Inc. is acting as the exclusive financial advisor
    • Morgan, Lewis & Bockius LLP is serving as legal advisor
  • SPAC
    • TD Cowen is acting as exclusive financial advisor and lead capital markets advisor.
    • Cohen & Company Capital Markets, a division of JVB Financial, LLC, is acting as a capital markets advisor
    • Greenberg Traurig, LLP is acting as legal advisor
    • DLA Piper LLP (US) is acting as legal advisor to TD Cowen and B. Riley Securities, Inc.
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