Microsemi Corp.’s $633 million buy of Canadian chipmaker Zarlink Semiconduc-tor Inc. last week puts the company on a clear path to reaching its goal of $1 billion in annual revenue and joining the upper rank of the mixed-signal market.
The deal is Microsemi’s largest to date and provides the Aliso Viejo-based chipmaker inroads in the communications and medical markets—two key segments in its growth plan.
The company circled the $1 billion revenue goal last year. It edged closer with a slew of recent acquisitions and internal growth over the last year.
The deal for Zarlink, expected to close next month, is expected to put them over the mark.
“You need to set goals and targets,” Microsemi Chief Executive James Peterson said hours after closing the biggest deal in the company’s history.
Analysts on average expect Microsemi to top $227 million in revenue in the current quarter. The company projects earnings of $45 million to $46.6 million for the period.
Ottawa-based Zarlink sees about $250 million in annual revenue.
Under Peterson’s watch, “the company has moved from being ‘Micro who’ to being one of the top three to five companies in the mixed-signal space,” Peterson said.
• Headquarters: Aliso Viejo<br >• Business: chipmaker<br >• Founded: 1960<br >• Ticker symbol: MSCC (Nasdaq)<br >• Market value: about $1.43 billion
Zarlink Semiconductor Inc.<br >• Headquarters: Ottawa<br >• Business: chipmaker<br >• Founded: 1971 as Mitel Corp.; changed name to Zarlink in 2001<br >• Ticker symbol: ZL.TO (TSX)<br >• Market value: About $475 million
• Notable: Microsemi increases offer for Zarlink to $633 million; deal expected to close next month
The market leader is Milpitas-based Linear Technology Corp., which sees annual sales of nearly $1.5 billion.
Peterson considers Linear “the guiding light” in that sector and said his company is ready to go head-to-head.
“Right now we’re in the rear-view mirror, but not for long” he said. “I would love nothing more than to see them in our rear-view mirror.”
The Zarlink buy may prove to be a crowning achievement for Peterson, who has overseen 10 acquisitions since 2009, including the $430 million buy of Northern California-based rival Actel Corp., which was Microsemi’s priciest before Zarlink.
The deal appeared to be losing steam as a Sept. 22 deadline neared on Microsemi’s initial $547 million bid, which was rejected by Zarlink’s board.
Peterson said he remained confident.
“I didn’t worry—I do M&A for a living” Peterson said. “It turns out I’m the white knight.”
Zarlink had rejected three of Microsemi’s earlier bids and urged its shareholders to oppose the takeover.
Microsemi boosted its offer for Zarlink’s shares by 19% to $3.98 per share, up from its initial offer of $3.35 a share.
Outstanding debt and Zarlink’s $107 million in cash accounted for the rest of the value of the deal.
Zarlink’s shares rose in recent weeks, prompting Microsemi to raise its bid to a 67% premium compared to its first offer, and a 15% premium on Zarlink’s closing price Sept. 21 on the Toronto Stock Exchange, the last trading day before the deal was announced.
Zarlink’s board has recommended the latest offer to shareholders.
