Microsemi and PMC-Sierra announced that the companies have entered into a $2.5 billion definitive agreement under which Microsemi will acquire PMC-Sierra for $9.22 in cash and 0.0771 per share of Microsemi common stock for each share in PMC stock. The deal represents a solid 77.4 percent premium over PMC’s closing stock price on September 30, 2015, or a value of roughly $2.5 billion.
The Microsemi win comes on the heels of its public bidding competition with Skyworks. PMC originally announced its acquisition by Skyworks in a deal valued at $2 billion in early October. However, Microsemi interjected with an unsolicited counter-bid worth $2.4 billion. At the time, Microsemi indicated that it had already been in talks with PMC prior to the Skyworks announcement.
The two companies jostled for position as Skyworks entered its own rebuttal bid, which was quickly followed by Microsemi’s final bid of $2.5 billion. PMC notified Skyworks last week that the Microsemi bid constituted a superior proposal, and gave Skyworks the option of submitting another counter-bid — which Skyworks apparently decided not to do.
“We are pleased PMC has accepted our compelling strategic offer, which clearly benefitsshareholders of both Microsemi and PMC. We can now shift our focus to realizing the significant synergies identified during our comprehensive analysis,” said James J. Peterson, Microsemi’s chairman and CEO.
PMC’s lucrative business features a healthy gross margin in the 70 percent range, and the acquisition places Microsemi in a competitive position on many fronts. Microsemi gains access to PMC’s award-winning Flashtec NVMe controllers and Switchtec PSX PCIe storage switches, among many other products and IP.
The Microsemi bid also offered a clearer path to regulatory approval that skirts Chinese regulators, which increases the likelihood of a speedy resolution to the acquisition. As such, Microsemi expects to achieve more than $100 million in annual cost synergies, with realization of $75 million of the savings in the first full quarter of combined operations.
Microsemi will fund the transaction with existing cash and issue $2.7 billion in new transaction debt, along with $0.6 billion in Microsemi stock. Shareholders of Microsemi will own 85 percent of the combined company, while PMC shareholders will own 15 percent. The boards of directors from the companies approved the deal, which is expected to complete in the first quarter of 2016 – barring any surprise bids from other companies, which is not expected.
