Microsemi has made another play in the consolidation sweeping across the semiconductor industry, offering US$2.2bn for PMC-Sierra to trump a US$2bn bid from fellow strategic Skyworks Solutions. The group said the acquisition complements its optical and switching portfolios, supporting its push into the data centre market.
Microsemi (Nasdaq:MSCC) has made another play in the consolidation sweeping across the semiconductor industry, offering US$2.2bn for PMC-Sierra (Nasdaq:PMCS) to trump a US$2bn bid from fellow strategic Skyworks Solutions (NASDAQ:SWK).
California-based PMC specialises in storage, optical and mobile network solutions and its products include chips for satellite IP routers.
Microsemi, which makes aerospace RF semiconductors including chips that are also used for commercial satellites, said the deal complements its optical and switching portfolios, while supporting its push into the data centre market.
“This acquisition will provide Microsemi with a leading position in high performance and scalable storage solutions targeted for data centre and cloud applications, while also adding a complementary portfolio of high-value communications products,” said Microsemi chairman and CEO James Peterson.
“Microsemi has a strong track record of integrating acquisitions and driving profitability, and we will benefit from increased scale, industry-leading margins, diversified market exposure, consolidated infrastructure and substantial cost savings in a combination with PMC.”
The bid continues Microsemi’s aggressive acquisition strategy. The firm launched a US$389m cash tender offer in March for Californian peer Vitesse Semiconductor, which targets markets including mobile access/IP edge, enterprise cloud access, and industrial-IoT networking.
Chip makers have been consolidating in recent years to gain scale and pool their resources in an increasingly competitive market. Intel, NXP Semiconductors and Avago Technologies are among those that have announced multibillion dollar acquisitions this year.
Microsemi is offering cash and stock for PMC in a deal valued at US$11.5 per target share, representing a 50% premium to the closing price on 5 October, the day before Skyworks’ offer was announced. The boards of both Skyworks and PMC had approved the original deal, and were on course to close it in H1 2016.
For each PMC share, Microsemi is offering US$8.75 in cash and 0.0736 of a common share. Microsemi would own 85% of the combined group with PMC shareholders holding the remaining 15%.
The terms are substantially the same as Skyworks US$2bn all-cash transaction, and the group said it is prepared to amend the deal structure to an “exchange offer”, enabling it to close as early as late December assuming swift action from PMC’s board.
It added that the deal is not tied to any financing contingency and would just require domestic regulatory approvals in the US, compared with a Skyworks acquisition that would be subject to foreign government entities including China.
The acquisition and repayment of existing credit facilities will be funded through US$2.7bn in new debt and US$0.6bn in Microsemi shares. Morgan Stanley is providing the committed financing.
Stifel is Microsemi’s exclusive financial adviser and O’Melveny & Myers is providing legal advice.
