Atmel Corp. Takeover Looking Less Likely

The way things have been going in big tech deals, it's generally safe to bet against a hostile takeover attempt. So it comes as little surprise that analysts are placing long odds on Microchip Technology Inc. (MCHP) and ON Semiconductor Corp.'s (ONNN) joint $2.3 billion unsolicited bid for chipmaker Atmel Corp. (ATML), which was unveiled Oct. 2.

The bidders are offering $5 per share in cash, a roughly 52% premium to the value of Atmel's closing stock price on the day before the bid was made public. ON Semi,  itself struggling, is hitching a ride on the much larger Microchip, whose roughly $5 billion market capitalization is more than double that of its partner in the offer. Under the deal, ON would buy Atmel's nonvolatile memory and radio frequency and automotive sector assets; Microchip would get the rest.

In a research note Tuesday, FBR Capital Markets analyst Craig Berger says he doubts the suitors will succeed. First, he says Atmel won't go for $5 or even $6 per share as it works through a restructuring and benefits from the big pullback in the value of the euro during the third quarter. Second, ON and Microchip haven't said much about how they'll get financing to pay for the deal, and this factor has been the death knell of several big tech deals lately. Third, Atmel's got a poison pill. Fourth, Atmel's board isn't set to meet for another six months, making it that much harder to overturn the shareholder rights provision. Finally, viable companies aren't going to sell at a low point in the market, he argues.

Berger goes on to cite two other big-ticket technology deals, each in the semiconductor industry and both of them hostiles, that foundered on the rocks of the turbulent markets: Vishay Intertechnology Inc.'s (VSH) $1.7 billion bid for International Rectifier Corp. (IRF) and Samsung Electronics Co. Ltd.'s $5.9 billion attempt to acquire SanDisk Corp. (SNDK). If things go like they did in these two failures, Atmel need only sit tight and wait until ON and Microchip's announcement that they're yanking their offer. - Olaf de Senerpont Domis

See Oct. 28 research note from FBR Capital Markets
See Oct. 2 post on ON's and Microchip's Atmel bid from Tech Confidential

Comments

[Ames Tiedeman:]

They think they can get it to 10 with cost cutting.

2008 Nov 02 08:36 PM