Failed merger talks won’t stop Dialog

Failed merger talks won’t stop Dialog

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By eeNews Europe

The outcome seems more dangerous for AMS than for Dialog. But what was the stumbling block?

It was odd that the move was being discussed as a merger of equals but operationally AMS AG (Unterpremstaetten, Austria) was looking to bid to takeover Dialog Semiconductor plc (Reading, England) and has abided by London Stock Exchange rules in declaring that it now does not intend to make such a bid for at least six months, subject to certain exceptional circumstances.

However, the deal was being put together it was clear that the merger talks were taking place while merger and acquisition swirls around across the industry. It seemed like a sensible move to bring to complementary companies together and bulk up and reduce the likelihood of one or both of them being acquired.

The complementary nature of AMS and Dialog was extensive. By its success in peripheral circuits to the application processor in mobile Dialog is now heavily aimed at the mixed-signal and wireless aspects of the mobile and consumer electronics. AMS produces more analog, MEMS, power and sensor products with penetration into industrial and automotive. Dialog is fabless while AMS retains a 200mm wafer fab although it also outsources manufacturing to southeast Asia.

And the deal would have created a European company of considerable scale. As it is one or both companies, although publicly held, could still be targeted by an overseas company, perhaps from the United States, perhaps from Taiwan or China, with an offer that shareholders find hard to resist, but which could end up endangering European electronic engineering.

As it is Dialog, led by the highly respected Jalal Bagherli as CEO, seems determined to be one of the acquirers rather than one of the acquired. I expect the company to grow organically and by acquisition. That said, Dialog is a public company and Bagherli has a fiduciary duty to do his best for the shareholders. And in 2004 Bagherli did achieve the sale of private company Alphamosaic Ltd. to Broadcom Corp. for about $123 million.

AMS on the other hand is that bit smaller than Dialog in terms of annual revenue and is perhaps now in danger of being acquired. By going public on their talks both companies  have revealed they are prepared to discuss the value of their businesses and how it can be deployed.

Dialog had annual sales of about $910 million in 2013 while AMS had annual sales of about $507 million. The acquisition of Taos in 2011, while contributing considerably to sales revenue, is starting to look like a bit of a reverse take-over of the Austrian operation with U.S. executives rising up through the organization and with Kirk Laney, former CEO of Taos, taking over as CEO of AMS.

Which is ironic as the company started out in the 1980s as a joint venture between an invited inward investor American Microsystems Inc. and Austrian steel company Voerst Alpine, in an effort to establish semiconductor technology and manufacturing in Austria. And that time the top management were seconded from the U.S.

However, the next business move could take the company headquarters out of Austria, which was perhaps one of the stumbling blocks in the talks with Dialog.

It is hard not to think that a merged AMS-Dialog led by Bagherli creating a broad European chip company with annual sales of $1.4 billion would not have been the best result for shareholders and our continental interests. It is hard to find other pairings within Europe that would have worked so well.

In any case there are more chapters to be written in European analog and mixed-signal semiconductor business.

Related links and articles:

News articles:

AMS, Dialog merger talks fail

AMS, Dialog confirm merger talks

AMS set to buy German gas sensor firm

Dialog Semiconductor acquires iWatt

CEO Interview: Jalal Bagherli of Dialog is ready to take a bet

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