One Micro to buy another for $8.35 billion
Microchip is well known as the vendor of PIC microcontroller range while Microsemi dates back to 1959 when it was founded as Microsemiconductor. The company has grown repeatedly by acquisition and merger and over time manouvered into FPGA and timing circuit sales. In 1991 it acquired a facility in Ennis, in county Clare Ireland with a competency in the development, manufacturing and high reliability testing of semiconductors to meet stringent aerospace, satellite, medical and security standards.
Microsemi manufactures FPGAs and system ICs for defense and aerospace, communications, industrial and data center applications.
Microsemi had full fiscal year 2017 sales of $1.81 billion, up 9.5 percent from the $1.65 billion reported in the 2016 fiscal year, which ended September 30. This compares with Microchip’s fiscal 2016 sales were $2.173 billion.
The cash deal at $68.78 per Microsemi share represented a small premium over Microsemi’s share price which jumped from about $64 to more than $67 on the announcement.
Microchip plans to finance the transaction with approximately $1.6 billion of cash from the combined company balance sheets, approximately $3.0 billion from Microchip’s existing line of credit, approximately $5.0 billion in new debt and a $0.6 billion bridging loan.
The deal is subject to the approval of Microsemi shareholders but has been approved unanimously by both boards of directors. With approval and subject to customary regulatory approvals and other closing conditions, the transaction is expected to close in 2Q18.
The deal while not completely complementary would expand Microchip’s capabilities in the data center, communications, defense and aerospace markets. Microsemi has been in keen advocate of RISC-V microprocessor architecture while Microchip has offered proprietary ISA’s such as PIC and AVR.
“Even as we execute a very successful Microchip 2.0 strategy that is enabling organic revenue growth in the mid to high single digits, Microchip continues to view accretive acquisitions as a key strategy to deliver incremental growth and stockholder value. The Microsemi acquisition is the latest chapter of this strategy and will add further operational and customer scale to Microchip,” said Steve Sanghi, chairman and CEO of Microchip, in a statement.
“This transaction represents a compelling opportunity for Microsemi stockholders, employees and customers by combining the leading embedded control market position of Microchip Technology with the world class power, security, reliability and performance solutions from Microsemi,” said James Peterson, chairman and CEO of Microsemi, in the same statement.
Related links and articles: