Microsemi Corp. (Nasdaq: MSCC), an Aliso Viejo-based semiconductor maker, is selling itself for an enterprise value of $10.15 billion to Microchip Technology Inc. (Nasdaq: MCHP).
Microchip, based in Chandler, Ariz., will acquire Microsemi for $68.78 per share in cash. The acquisition is a 7% premium to today’s closing price of $64.30. In after-hours trading, the shares rose to $67.50. Microchip’s shares also rose after hours 5.4% to $93.85.
“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 J. Peterson, chairman and chief executive of Microsemi.
Microsemi last month was the subject of speculation about a possible sale to Broadcom Ltd. if the latter’s bid for Qualcomm Inc., failed, according to RBC Capital analyst Amit Daryanani. Then this week, the Wall Street Journal reported the potential Microchip deal.
The company under Peterson has undergone a diversification effort in the communications, Internet of Things and data center segments to augment its legacy positions in the military, industrial and aerospace sectors.
Its chips are built into satellites, drones, digital televisions, defibrillators, pacemakers and other devices made by the likes of Boeing Co., Hewlett-Packard, Dell Inc. and Samsung Electronics.
Following the closing, the transaction is expected to be immediately accretive to Microchip’s non-GAAP earnings. Based on currently available information, Microchip anticipates achieving an estimated $300 million in savings in the third year after close of transaction.
Microchip plans to finance the transaction with approximately $1.6 billion cash from the combined companies’ balance sheets, $3 billion from Microchip’s existing line of credit, $5 billion in new debt and a $600 million bridge loan.
The board of directors of each company has unanimously approved the acquisition. The deal is subject to approval by Microsemi stockholders, customary regulatory approvals and other closing conditions, the transaction expected to close next quarter.
J.P. Morgan acted as Microchip’s exclusive financial advisor and is providing $5.6 billion in committed financing. Wilson Sonsini Goodrich & Rosati, P.C. was Microchip’s legal advisor. Qatalyst Partners is acting as exclusive financial advisor to Microsemi while O’Melveny & Myers LLP served as Microsemi’s legal advisor.
