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.
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
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, 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
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.
Nov. 9, 2015, 6:20 PM
- Elliott, which has waged many successful activist campaigns involving tech companies, argues Dialog Semi's (OTC:DLGNF) planned cash/stock purchase of Atmel (NASDAQ:ATML) is too costly, and will yield little in cost savings. The firm controls 2.9% of Dialog's voting rights.
- Shareholder advisory firm ISS came out against the Atmel deal in late October. Dialog's shares have fallen sharply since the deal was announced in September, thanks partly to Dialog's weak Q3 report.
- Atmel has fallen to $7.30 after hours. Shares are now only $0.03 above where they traded prior to the deal announcement. Dialog shareholders vote on the deal on Nov. 19.
Oct. 30, 2015, 4:39 PM
- Bloomberg reports shareholder advisory firm ISS opposes Dialog Semi's (OTC:DLGNF) cash/stock deal to acquire Atmel (NASDAQ:ATML).
- The value of the stock portion of Dialog's planned payout to Atmel took a big hit earlier this week when Dialog plunged in response to a Q3 miss and weak Q4 guidance (Apple and various chip stocks also fell).
- Based on Dialog's Friday close in Frankfurt (occurred before the ISS news), the payout to Atmel shareholders is currently equal to $8.80/share - 21% above where Atmel last traded before the deal was announced, but 16% below the deal's $10.42/share value at the time of its announcement.
- Atmel fell 3.9% in regular trading, closing at $7.60.
- Earlier: Atmel falls on strong volume
Sep. 28, 2015, 12:42 PM
- Following a Reuters report noting its interest in fellow microcontroller vendor Atmel (ATML -0.1%), Cypress Semi (CY -3.4%) admits it submitted a buyout offer to Atmel's board, but adds the offer has expired and that Cypress "has withdrawn its interest" in a deal.
- Atmel, which has agreed to cash/stock deal with Dialog Semi (OTC:DLGNF), has returned its morning gains, while Cypress (though off its lows) remains down strongly. The Nasdaq is down 2.3%.
Sep. 28, 2015, 7:51 AM
- Atmel (NASDAQ:ATML) +6.6% premarket following a Reuters report that Cypress Semiconductor (NASDAQ:CY) is working on an offer to acquire the company that agreed earlier this month to sell itself to Dialog Semiconductor (OTC:DLGNF).
- CY has told ATML it believes its offer will be superior to Dialog's cash-and-stock deal, which was worth $4.6B when it was announced on Sept. 20, according to the report.
- A merger with ATML would be transformational for CY, which has a market capitalization of just $2.9B.
Sep. 21, 2015, 1:10 PM
- Dialog Semi (OTC:DLGNF) closed down 18.9% in Frankfurt after announcing a cash/stock deal to buy Atmel (NASDAQ:ATML). With today's selloff having cut the value of the stock component of the deal by nearly $1, Atmel is trading at $8.14, 22% below the deal's original estimated value of $10.42.
- With Dialog currently sporting a $3.2B market cap, the deal is more of a merger than an acquisition. Dialog, which supplies power management chips for the iPhone, iPad, and Apple Watch, argues Atmel will "complement its leadership position in Power Management ICs with a leading portfolio of proprietary and ARM-based Microcontrollers in addition to high performance ICs for Connectivity, Touch and Security," as well as provide new sales channels. (PR)
- Four firms have downgraded Atmel to neutral ratings. SA author Chris DeMuth Jr. thinks Texas Instruments, Analog Devices, or China Electronics (OTCPK:CEHD - previously rumored) could launch a rival bid, particularly given Dialog's selloff.