Based on the closing stock price of Microsemi on Oct. 16, 2015, the transaction is valued at $11.50 per PMC share, representing a premium of approximately 50 percent to the closing price on Oct. 5, 2015, the last trading day prior to the announcement of PMC’s proposed acquisition with Skyworks Solutions, Inc. Microsemi, which makes chip equipment and provides software for cloud data, said the deal would help it provide scalable storage services for data centre and cloud applications.
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“The addition of PMC’s leading storage business as well as its highly complementary communications business furthers our goal to diversify our revenue stream and product offerings”, Microsemi’s Chief Strategy Officer Steve Litchfield said on a conference call. Under the deal PMC-Sierra shareholders will receive $8.75 in cash and 0.0736 of a share of Microsemii stock for each share of PMC-Sierra they hold.
Microsemi said the offer values PMC-Sierra at about $2.2 billion, excluding PMC-Sierra’s net cash balance as of June 27.
“This is a much better fit for Microsemi than it is for Skyworks”, Stephens Inc analyst Harsh Kumar said. Microsemi believes its proposal constitutes a “Superior Proposal” under the terms of PMC’s merger agreement with Skyworks. The other conditions of Microsemi’s offer, conveyed in a letter to PMC-Sierra’s board, are “substantially the same” as the Skyworks bid, it said. We note that MSCC cites that it could close the deal by the end of the calendar year and is only subject to domestic regulatory approval. Overall, given the $0.60 in year one accretion and material cost savings ($100M in OPEX synergies, $75M in first quarter post close) we view the transaction as a positive.
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Stifel is Microsemi’s financial adviser for the deal, while O’Melveny & Myers LLP is its legal adviser. Microsemi advanced 2.3 percent to $37.36, giving the company a market value of $3.6 billion.
