Microsemi Corp., Broadcom Corp. and Western Digital Corp. each played their cards differently, but all three tech companies landed their priciest acquisitions to date in the end.
Aliso Viejo-based chipmaker Microsemi showed its hand early, placing an offer directly to shareholders in a high-stakes hostile takeover bid.
Irvine-based chipmaker Broadcom—a frequent buyer—played it closer to the vest in typical fashion.
Western Digital had to raise the ante after international regulators forced the Irvine-based disk-drive maker to give up assets before gaining final approvals.
The different paths taken by these buyers reflect the leadership, growth strategies and business styles that often are behind mergers and acquisitions.
Microsemi made a splash last July, when Chief Executive James Peterson sent a letter to the board of Zarlink Semiconductor Inc. outlining his plan to pursue the Ottawa-based chipmaker.
“Your continued refusal to discuss our proposal compels us to directly inform your shareholders of our attractive proposal,” Peterson wrote.
The cash bid was $548.7 million at the time, a 40% premium based on Zarlink share prices July 19 on the Toronto Stock Exchange.
A few weeks later, Zarlink Chairman Adam Chowaniec publicly urged shareholders to reject the deal, saying the offer “significantly” undervalued the company.
Peterson told the Business Journal that Microsemi would pull its $548.7 million bid off the table at midnight on Sept. 22 if a deal wasn’t struck and that the company was not interested in negotiating with Chowan-iec. On that date, Mic-rosemi upped the bid to about $624 million, prompting Zarlink’s board to recommend the offer to shareholders.
Microsemi closed the deal in mid-October, finalizing a rare hostile takeover on Wall Street. Peterson, who often refers to himself as “Jimmy P” and jokes with analysts on earnings calls, said he had remained confident throughout the takeover campaign.
“I didn’t worry,” he said at the time. “I do M&A for a living.”
Variety of Uses
Microsemi’s chips serve a variety of military, aerospace, consumer and industrial uses. Its products are built into satellites, digital televisions and other devices.
The company was interested in Zarlink for its inroads in the communications and medical markets—key segments of Micro-semi’s growth plan. The deal is expected to put Microsemi over $1 billion in annual revenue and position the company to surpass Newport Beach-based Jazz Semiconductor Inc. as the county’s No. 2 chipmaker in revenue.
Broadcom has held that top title for years. Its frequent buys have played a big part in gaining entry to key markets and growth areas.
The company closed its $3.7 billion buy of NetLogic Microsystems Inc. in Santa Clara last month. It was Broadcom’s most expensive acquisition to date and one of the priciest among chipmakers in recent years.
The buy extends the company’s reach in fourth-generation wireless networks, or 4G, as well as processors.
Broadcom has coveted the sort of infrastructure technology—network, embedded and knowledge-based processors—that’s at the core of NetLogic.
The field-clearing offer was nearly nine times NetLogic’s revenue, the biggest multiple paid in any deal of $500 million or more in the chip industry since 2004, according to Bloomberg data. The deal came after Broadcom executives debated the best route to gaining processor technology and other network infrastructure for months.
Chief Executive Scott McGregor said the company had three basic options: build within, work with startups or acquire an established player. Cost, time to market and reducing risk were key concerns, and NetLogic quelled all three, he told the Business Journal at the time.
“Whenever you buy a more mature company, you have less market risk,” McGregor said. “You know a bit more of what you’re getting and you know the customers are going to like it.”
Broadcom has completed more than 50 deals in the last decade, and some took years to cultivate. Others never got through the vetting process, Broadcom cofounder and Chief Technical Officer Henry Samueli said.
“If it’s a good cultural and management fit, then we would engage in business discussions,” Samueli told the Business Journal last year. “It’s a very long process.”
Western Digital has had to negotiate more with regulators than executives at Hitachi Global Storage Technologies Ltd. in its bid to buy the San Jose-based drive maker.
Just last week it received final approvals from the Federal Trade Commission, the European Union and Chinese regulators.
EU Condition
Western Digital, in a nod to the EU, agreed to sell off its business of 3.5-inch hard disk drives to Toshiba Corp.
As part of the deal, it will acquire Toshiba Storage Device Co. in Thailand, which hasn’t regained its hard drive manufacturing operation since heavy flooding late last year damaged many regions in
the country. The small-drives selloff alleviated concerns raised in the FTC’s conditional approval. The Japan Fair Trade Com-
mission approved the deal in late Decem-ber.
Hard-disk drives store and allow access to data. Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics such as DVR players.
