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RAISING MONEY TO SPEND MONEY At first glance, Cortina Systems Inc.’s $115 million acquisition of Intel Corp.’s optical networking components business appeared to be a straightforward transaction. Sunnyvale-based Cortina, a maker of integrated, high-speed digital and analog microchips, has been looking to expand in the communications semiconductor market. And this acquisition fits the bill, giving Cortina access to Intel’s large portfolio of products for network infrastructure applications. Intel, meanwhile, was looking to divest itself of the operation to focus on its core communications and embedded businesses. But Cooley Godward Palo Alto partner James Fulton Jr. said the transaction, which he worked on for Cortina for at least three months, was anything but straightforward. First, the five-year-old venture-backed operation had to raise money to pay for the acquisition. Cortina raised $132 million from new investors and existing shareholders. New investor Institutional Venture Partners chipped in $20 million. Alloy Ventures, Bridgescale Partners, Doll Capital Management, Sofinnova Ventures and existing shareholders Canaan Partners and Morgenthaler also contributed to the new round of financing. “At the same time that we were negotiating with Intel, we were doing a syndicate,” Fulton said. “In the degree of difficulty category, this was a 10.” Cortina has raised more than $217 million to date, including the latest round. The acquisition was done through an auction, and Fulton said the bidding was done on a tight deadline. Cortina had to comply with Intel’s requirements to even be allowed to make a bid. “Intel sort of told us what they are looking for and we really had to focus on what we needed to make it successful,” Fulton said. “It wasn’t the typical deal at all. We had to fully negotiate the terms of the deal even before the full negotiation started.” As part of the deal, Intel will become a shareholder of Cortina. The acquisition included an undisclosed mix of cash and stock. Cortina will absorb roughly 70 employees from the Intel unit, and will add new offices in Folsom and Raleigh, N.C. “The sale only included Intel assets, so we had to identify the employees we want to bring over and convince them to come over,” Fulton explained. Cooley’s legal team included associates Nicole Brookshire and John Clendenin and special counsel Francis Fryscak. Gibson, Dunn & Crutcher associate M. Lucy Schlauch in Denver represented Intel. Wilson Sonsini Goodrich & Rosati partner Steven Bochner in Palo Alto represented Institutional Venture Partners.

Xenia P. Kobylarz

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