Shares of Irvine-based Microsemi Corp., a maker of chips for military, aerospace and industrial uses, jumped Monday as investors gave a thumbs-up to its $430 million buy of Mountain View’s Actel Corp.
The stock closed up nearly 7% on a recent market value of $1.5 billion.
Microsemi agreed to buy Actel for $20.88 per share in an all-cash deal that’s expected to close by the end of the current quarter.
The deal price is a 30% premium to Actel’s closing price of about $16 per share on Friday.
Actel’s shares skyrocketed and closed up 30% on Monday on a recent market value of about $550 million.
The move is set to “strengthen Microsemi’s position in its four focused markets—security and defense, commercial aerospace and satellite, enterprise and industrial markets,” the company said in a statement.
Actel’s technology is complementary to Microsemi’s business making what’s called “high reliability” chips, which get built into devices that are costly if they fail.
“This acquisition again is consistent with Microsemi’s corporate strategy to expand beyond being a discrete component supplier to a more systems-approach provider, especially in high-reliability, to deliver more sub-system, higher dollar content solutions,” said Tore Svanberg, an analyst at Stifel, Nicolaus & Co. in Baltimore. “We view the acquisition as positive for Microsemi.”
Svanberg estimates that Actel and Microsemi “have a 90% overlap” in their customers, he said in a research note.
He has a “buy” rating on Microsemi’s stock.
Typically, when a sizable acquisition is announced, the buyer’s shares take a hit.
Not so with Microsemi—investors were likely encouraged by the big profit boost the deal is set to bring.
The company said it “expects significant synergies from this immediately accretive transaction.”
The Actel deal is set to yield an additional $18 million to $23 million in profits for Microsemi by the end of 2011.
Microsemi also boosted its sales outlook and reiterated its profit estimates for the September quarter.
It expects to report profits of $27 million to $29 million on sales of $146 million to $150 million.
Wall Street analysts, on average, are expecting Microsemi to report profits of $28 million on sales of $147 million.
Microsemi’s chips go into a variety of devices, including laptops, digital televisions, satellites, X-ray body scanners and weapons systems.
The Actel deal is its third acquisition in as many months.
