FBR, Nomura name potential chip industry M&A targets

The consolidation wave that has hit the semi industry could soon yield tax inversion deals for foreign firms similar to deals seen in the healthcare industry, says FBR's Christopher Rolland.

Inversion deals allow U.S. companies buying foreign firms to see lower tax rates if less than 80% of the equity in the new company is owned by legacy U.S. shareholders, and the post-merger company has substantial foreign ops.

Rolland thinks ARM (ARMH), NXP (NXPI), Mellanox (MLNX), and Taiwan's MediaTek could be among the foreign companies targeted by U.S. chipmakers. Worth noting: Mellanox sells more than just chips, and ARM's business model depends on the company maintaining a neutral status within the industry.

Meanwhile, Nomura's Romit Shah names 15 potential M&A candidates, and divides them into 3 groups: "Sub-scale companies" with high margins and strong IP; "strategic companies" with compelling product lines; and "undervalued companies."

Shah's "sub-scale companies:" IDTI, ISIL, MTSI, MCRL, SMTC, SLAB.

"Strategic companies:" ALTR, AMCC, ATML, CAVM, MPWR, BRCM ($22.5B market cap could make it tough to digest).

"Undervalued companies:" DIOD, IRF, MSCC.

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Comments (3)
  • Yaron Ron Reuven
    , contributor
    Comments (451) | Send Message
    no one would ever purchase ARMH at the current $21.5 Billion valuation when company barely generates $1 billion in total sales, and much less in profits. The only buyers are investors that are depending on unrealistic valuations becoming even more ridiculous. Either way, this is a terrible recommendation by FBR analyst, who should know better.
    17 Jun 2014, 07:13 PM Reply Like
  • Nettligent
    , contributor
    Comments (1346) | Send Message
    AMD is perfect for ARMH
    18 Jun 2014, 03:07 AM Reply Like
  • Stone Sr.
    , contributor
    Comments (4) | Send Message
    What about Apple Inc. (ticker AAPL) to acquire NXP (ticker NXPI) for its mobile payment solution as well as car communication chip solution, the latter of which Apple is collaborating with BMW et al, and is considered as one of the fatest growing segment?
    14 Jul 2014, 01:39 PM Reply Like
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