Microsemi Offers to Buy PMC-Sierra in $2.4 Billion Deal

19 Oct 2015 | Author: | No comments yet »

Microsemi Offers $2.4 Billion for PMC-Sierra to Top Skyworks.

The California chip maker Microsemi Corporation said on Monday that it had offered to acquire its fellow chip maker PMC-Sierra in a cash-and-stock deal valued at about $2.4 billion.

PMC-Sierra (NASDAQ:PMCS) +10.8% premarket after Microsemi (NASDAQ:MSCC) offers to buy the company for $11.50/share, or ~$2.4B, in an offer MSCC says is a “superior” proposal over last week’s $2B offer from Skyworks Solutions’ (NASDAQ:SWKS). Under MSCC’s offer, PMCS shareholders would get $8.75 in cash and 0.0736 of a share of its stock for each PMCS share held; MSCC’s offer represents a ~12% premium to PMCS’s Friday close and ~50% above PMCS’ price on Oct. 5 before it agreed to the bid from SWKS.

Microsemi said that it believed its offer was superior to the Skyworks proposal and provided PMC-Sierra with “substantial premium and immediate cash value.” “Based on extensive discussions with PMC over the past 18 months and comprehensive analysis, we believe this transaction offers compelling strategic and financial benefits for the shareholders of both Microsemi and PMC,” James J. Microsemi, a maker of chips for the communications, security, aerospace and industrial markets, joins Dialog Semiconductor Plc, Intel Corp. and Avago Technologies Ltd. in seeking combinations with rivals amid higher costs and stiffer competition. Peterson, the Microsemi chairman and chief executive, said in a news release. “This acquisition will provide Microsemi with a leading position in high performance and scalable storage solutions targeted for data center and cloud applications, while also adding a complementary portfolio of high-value communications products,” he added. The company said a takeover of PMC-Sierra would let it expand its product offering and allow the combined company save more than $100 million a year in expenses. PMC-Sierra, based in Santa Clara, California, makes chips that control drives in network equipment, data-center storage systems and mobile-phone networks.

The company, which reported sales declines in two of the past three years, had hired a financial adviser to seek a sale of the company, people familiar with the matter had said. There has been a wave of consolidation in the semiconductor industry in recent years as chip makers look to increase their scale and product offerings to better serve Apple and other electronics makers, while cutting their costs. In May, Avago agreed to acquire Broadcom, whose chips are used in iPhones and other consumer devices, for $37 billion, while June, Intel agreed to pay $16.7 billion for the chip maker Altera. Microsemi, based in Aliso Viejo, Calif., manufacturers semiconductors for a variety of industries, including the aerospace, communications, defense, security and industrial sectors.

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