Microchip Technology And Atmel The Right Match
Stephen Simpson, CFA
Stephen Simpson, CFA
Softer Markets And Weak Execution Are An Ugly Mix For Atmel
Stephen Simpson, CFA
Stephen Simpson, CFA
Mon, Mar. 14, 2:00 PM
- The FTC and Germany's Federal Cartel Office have approved Microchip's (MCHP -1.2%) planned $3.4B acquisition of fellow microcontroller maker Atmel (ATML - unchanged).
- Korea' Fair Trade Commission is still reviewing the deal - Microchip "anticipates receiving approval" - and French regulators are reviewing "certain French ISS and defense business matters." Atmel shareholders are due to vote on the deal on April 1. Microchip previously said it expects the acquisition to close in calendar Q2.
Mon, Feb. 29, 8:12 AM
- Atmel (NASDAQ:ATML): Q4 EPS of $0.06 misses by $0.01.
- Revenue of $261.3M (+6.2% Y/Y) misses by $10.58M.
Sun, Feb. 28, 5:35 PM
Tue, Jan. 19, 5:10 PM
- It's official: Microchip (NASDAQ:MCHP) is buying Atmel (NASDAQ:ATML) for $8.15/share in cash and stock, or an enterprise value of $3.4B. Atmel declared Microchip's offer superior to Dialog Semi's (OTC:DLGNF) last week, and Dialog later stated it wouldn't try to one-up Microchip. Dialog will get a $137.3M termination fee.
- The deal is expected to close in calendar Q2. Microchip will finance it via existing cash and credit facility borrowings. $170M/year in cost and revenue synergies are expected in FY19 (ends March '19).
- Microchip is paying $7/share in cash and $1.15/share in stock, with the amount of shares to be issued capped at 13M - if necessary due to a lower stock price, Microchip will up its cash payout. Concurrently, Microchip is upping its available buyback authorization by 3.6M shares to 15M, and plans to "repurchase the approximate number of shares it issues in the Atmel acquisition."
- Separately, Microchip says it expects to report FQ3 (calendar Q4) revenue of $552M and EPS of $0.62-$0.63, slightly above a consensus of $551.8M and $0.61. Gross margin guidance has been revised to 57.9% from 57.7%-57.9%. "Microchip's core business in the December quarter remained strong amidst the turbulence seen in the macro environment," says CEO Steve Sanghi. Official results arrive on Feb. 3.
- Earlier today: Morgan Stanley upgrades Microchip, praises Atmel deal
Tue, Jan. 19, 1:41 PM
- Believing the company's planned cash/stock acquisition of fellow microcontroller maker Atmel (ATML +0.6%) is a "game-changer," Morgan Stanley's Craig Hettenbach has upgraded Microchip (MCHP +1.8%) to Overweight, and set a $55 target.
- Hettenbach notes an Atmel acquisition would increase Microchip's exposure to 32-bit ARM microcontrollers (a fast-growing segment), and believes a deal would be accretive by 20%.
- Last week, Atmel declared Microchip's $8.15/share offer for the company superior to Dialog Semi's existing deal to buy Atmel. Soon after that, Dialog announced it wouldn't try to one-up Microchip's offer.
- Atmel, which trades $0.20 below Microchip's offer price, has been downgraded to Equal Weight by Hattenbach. Companies set to be acquired often get upgraded/downgraded to neutral ratings.
- Microchip and Atmel's calendar Q4 reports are due in the coming weeks. Atmel cut its Q4 sales guidance six days ago.
Thu, Jan. 14, 2:38 PM
- Dialog Semi (OTC:DLGNF) says it won't revise its existing offer to acquire Atmel (ATML - unchanged). That clears the way for Microchip (MCHP +2.8%) to acquire Atmel with its $8.15/share cash/stock bid, which Atmel recently declared to be superior to Dialog's offer.
- Atmel will pay Dialog a $137.3M termination fee if its deal with the U.K. chipmaker is terminated. Its shares currently trade at $7.97. Microchip is rallying on a day the Nasdaq is up 2.1%.
Wed, Jan. 13, 5:51 PM
- Atmel (NASDAQ:ATML) now expects Q4 revenue of $261M-$262M, below prior guidance of $266M-$286M and a $276.7M consensus. EPS guidance of $0.06 is slightly below a $0.07 consensus.
- Gross margin guidance has been narrowed to 47.3%-47.7% from 47%-48%, and opex guidance to $98M-$100M from $98M-$102M. A $210M quarter-ending cash balance is expected.
- The revenue shortfall is blamed on "weaker than expected billings, primarily in Asia, as distributors reduced inventory levels due to uncertainties associated with the company's ongoing acquisition process."
- With investors focused on that "acquisition process," Atmel remains unchanged after hours.
- Earlier: Atmel deems Microchip's $8.15/share offer superior to Dialog's bid
Wed, Jan. 13, 9:19 AM
- Atmel has notified Dialog Semi (OTC:DLGNF), with whom it agreed to a cash/stock deal in September, it intends to terminate its merger agreement with the company. However, Atmel's board "will consider in good faith any changes to the Dialog merger agreement or other arrangements that Dialog may offer in writing and would be legally binding upon Dialog by 5:00 PM California time on Tuesday, January 19, 2016." Atmel will pay a $137.3M termination fee if the Dialog deal is terminated.
- ATML +4.7% premarket to $8.04.
- Prior Atmel M&A coverage
Thu, Jan. 7, 9:15 AM
- Gainers: INVT +35%. DVAX +27%. QURE +14%. HMY +9%.
- Losers: TLOG -75%. EPZM -20%. GALE -19%. FINL -17%. SUNE -14%. AKBA -11%. RLYP -8%. FRO -8%. OTIC -8%. CIG -7%. SYN -7%. ATNM -7%. JKS -7%. KBH -7%. SAGE -7%. CEMP -7%. DNR -6%. ATML -6%. WLL -6%. SDRL -6%. ADMS -6%. BHP -6%. BBL -5%. AEZS -5%. VALE -5%. GGB -5%.
Wed, Jan. 6, 6:10 PM
- Bloomberg reports Microchip (NASDAQ:MCHP) is reconsidering its offer to acquire Atmel (NASDAQ:ATML). Atmel has fallen to $8.00 after hours as a result.
- Reuters reported on Monday Microchip, believed to be the unnamed suitor Atmel has reported receiving a $9/share offer from, planned to submit a binding offer for Atmel by early next week. However, it added Microchip's due diligence process had taken longer than expected due to concerns about weakening business trends facing Atmel.
- If Microchip backed out, the coast would be clear for Dialog Semi (OTC:DLGNF) to acquire Atmel via the cash/stock deal that was struck in September.
Mon, Jan. 4, 4:15 PM
- Reuters reports Microchip (MCHP -1.3%) plans to submit a binding offer for Atmel (ATML +0.8%) by early next week. It adds the microcontroller makers have "made some progress" in M&A talks, and that Microchip's due diligence process has taken longer than expected due to worries about "weaker business trends facing Atmel."
- Reuters reported in mid-December Microchip had made a $9/share offer for Atmel. Atmel, still officially set to be acquired by Dialog Semi (OTC:DLGNF) in a cash/stock deal, previously disclosed it had received a new buyout offer, but didn't name the suitor.
- Atmel caught a slight bid on Reuters' report just before the close. Shares closed today at $8.68.
Dec. 15, 2015, 3:11 PM
- Reuters reports Microchip (MCHP +2.4%) is the undisclosed suitor Atmel (ATML -0.7%) reported last Friday it had received a buyout offer from. The suitor is offering Atmel shareholders $9/share in cash, with an option to receive up to $1B of their payout in stock.
- At the time, Atmel said the offer "would reasonably be expected" to yield a superior proposal to Atmel's cash/stock deal to be acquired by U.K. power management chipmaker Dialog Semi (OTC:DLGNF). Dialog's shares fell 1.1% in Frankfurt today (after initially seeing bigger losses) in response to a Q4 warning.
- Microchip's shares have added slightly to their Tuesday gains in response to the report, while Atmel's have slightly pared their Dialog-induced losses. Acquiring Atmel, a fellow microcontroller maker, would give Microchip greater scale as it squares off against NXP/Freescale (just merged), Texas Instruments, Reneaas, Infineon, and other rivals.
Dec. 11, 2015, 6:22 PM
- Atmel (NASDAQ:ATML) has received a buyout offer from an unnamed suitor. Shareholders would receive $9/share in cash, with an option to receive $1B of their payout in stock. For reference, Atmel would be worth $3.9B at $9/share.
- Atmel's board has concluded the offer "would reasonably be expected" to yield a superior proposal to Atmel's existing cash/stock deal to be acquired by Dialog Semi (OTC:DLGNF). Dialog's offer (involves $4.65/share in cash) was worth $10.42/share at the time the deal was announced in September, but Dialog's shares have fallen considerably since.
- The board plans to engage in talks with the unnamed suitor. Atmel has jumped to $9.20 after hours.
- Prior Atmel/Dialog coverage
Nov. 13, 2015, 7:37 AM
Nov. 12, 2015, 5:14 AM
- Activist hedge fund Elliott has increased its stake in Dialog Semiconductor (OTC:DLGNF) to 3.6% and said it received positive feedback from co-shareholders against the acquisition of U.S. peer Atmel (NASDAQ:ATML).
- Dialog isn't taking the punches sitting down. The company's board is now claiming that Elliott's motivations "appear to be based on a short-term risk arbitrage" and noted that the activist group has a short position in Atmel, which would likely lead to a profit if the deal collapses.
- Previously: Dialog backs Atmel deal despite Elliott campaign (Nov. 11 2015)
Nov. 11, 2015, 3:10 AM
- Dialog Semiconductor (OTC:DLGNF) is sticking with its plan to buy U.S. peer Atmel (NASDAQ:ATML), rebuffing activist hedge fund Elliott, which is seeking to rally co-shareholders to vote against the acquisition.
- Looking to expand its industrial product portfolio, Dialog agreed to acquire Atmel for about $4.6B in September, but Elliott believes the deal will harm the company's value.