Storage boost: The addition of PMC-Sierra's leading storage business will diversify Microsemi's business.
Chipmaker Microsemi Corp offered to buy PMC-Sierra Inc for about US$2.2bil (RM9.4bil) trumping a US$2bil (RM8.5bil) offer from Skyworks Solutions Inc, to expand its offerings for telecom, datacentre and cloud customers.
Microsemi makes chip equipment and provides software for cloud data. The company has been trying to build up its communications business through a series of acquisitions at a time when an explosion of data from mobile devices has greatly boosted the need for efficient storage hubs.
"The addition of PMC's leading storage business as well as its highly complementary communications business furthers our goal to diversify our revenue stream and product offerings," Microsemi's chief strategy officer Steve Litchfield said on a conference call.
Microsemi said the total value of the deal was US$2.4bil (RM10.2bil).
The company is offering PMC shareholders US$8.75 (RM37.45) in cash and 0.0736 of its shares for each share held.
Including Monday's gains, PMC shares have risen more than 50% since Oct 5, when Apple Inc supplier Skyworks offered to buy PMC for US$10.50 (RM44.90) per share in cash.
"This is a much better fit for Microsemi than it is for Skyworks," Stephens Inc analyst Harsh Kumar said. "There is much more overlap on the product side and the end-market side than there is with Skyworks."
PMC and Skyworks did not respond to requests for comment.
Microsemi shareholders will own about 85% of the combined company, with PMC-Sierra's shareholders holding the rest.
Microsemi said it expects to achieve more than US$100mil (RM420mil) in annual cost savings, of which over US$75mil (RM321.2mil) is expected in the first full quarter after the deal closes.
The company, which made the offer in a letter to PMC-Sierra's board, said the deal was expected to add US$0.60 (RM2.55) to its adjusted earnings per share in the first year after the transaction closes.
Morgan Stanley Senior Funding Inc is providing committed financing for deal, which is expected to close in December.
Stifel is Microsemi's financial adviser for the deal, while O'Melveny & Myers LLP is its legal adviser. — Reuters
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