PMC - Sierra, Inc.NASDAQ
PMC-Sierra Leveraged To High-End Product Cycles
Stephen Simpson, CFA
Stephen Simpson, CFA
Mon, Jan. 11, 9:35 AM
- Microsemi (NASDAQ:MSCC) now expects FQ1 revenue to to be near the high end of a $325M-$329M guidance range; consensus is at $326.2M. FQ1 results are due on the afternoon of Jan. 28.
- The company adds it has obtained (through a $450M debt offering and credit facility commitments) the financing needed to close its $2.5B cash/stock purchase of PMC-Sierra (NASDAQ:PMCS), and has also seen the end of a U.S. antitrust waiting period. Closing is expected on Friday.
- Microsemi reiterates its goal of achieving $100M/year in deal synergies, with $75M achieved in the first full quarter of combined operations. As previously announced, Microsemi is paying $9.22 in cash and issuing 0.0771 shares for each PMC-Sierra share.
Nov. 24, 2015, 11:59 AM
- Microsemi (MSCC -6%) has sold off after striking a $2.5B deal to acquire PMC-Sierra (PMCS -1.6%), thus ending a bidding war with Skyworks. PMC, which is receiving a portion of its payout in Microsemi stock, is down moderately.
- Some concerns exist about the deal price, as well as regarding synergies between Microsemi's core analog/power management chip business and PMC's storage controller and telecom IC businesses. Microsemi, for its part, asserts the deal gives it "a leading position in high performance and scalable storage solutions, while also adding a complementary portfolio of high-value communications products." Some synergies exist between PMC's offerings and those of Ethernet chipmaker Vitesse, which Microsemi acquired earlier this year for $389M.
- Based on Microsemi's current trading price of $34.08, the PMC deal is worth $11.84/share. PMC currently trades at $11.67.
Nov. 24, 2015, 7:24 AM
- Microsemi (NASDAQ:MSCC) has agreed to buy PMC-Sierra (NASDAQ:PMCS) for about $2.5B just hours after Skyworks Solutions (NASDAQ:SWKS) said it won't modify its bid.
- The deal will see Microsemi pay $9.22 in cash and 0.0771 of a company share for each PMC common share, representing a 77.4% premium to PMC's closing stock price as of Sept. 30.
- Microsemi anticipates the transaction to achieve more than $100M in annual cost synergies and estimates approximately $0.60 of non-GAAP EPS accretion in the first full year after closing.
- PMCS +0.7% premarket
- Previously: Skyworks abandons deal for PMC (Nov. 24 2015)
Nov. 24, 2015, 6:21 AM
- Skyworks Solutions (NASDAQ:SWKS) has withdrawn its agreed takeover bid for PMC-Sierra (NASDAQ:PMCS) after an increased offer of $2.3B from Microsemi (NASDAQ:MSCC) gained the backing of the target's board.
- Skyworks said it won't modify its bid and that the company is entitled to a $88.5M termination fee from PMC.
- Semiconductor makers have pursued mergers at a record pace this year as surging costs for design and manufacturing, coupled with a shrinking customer base, have created a need to bulk up.
- Previously: PMC-Sierra board gives thumbs up to latest Microsemi bid (Nov. 19 2015)
Nov. 18, 2015, 7:33 AM
- The new proposal would pay $9.22 in cash and 0.0771 shares of MSCC stock for each share of PMCS. Based on yesterday's close, this values each share of PMCS at $12.05.
- The previous bid was for $9.04 in cash and the same amount of MSCC shares.
- The new deal would still be immediately accretive to Microsemi's non-GAAP EPS (by $0.60 in year one) and free cash flow.
- Previously: PMC-Sierra: Skyworks offer still superior to Microsemi bid (Nov. 2)
- PMCS +2.4% to $11.93 premarket; MSCC flat, Skyworks SWKS +1.1%
Nov. 2, 2015, 3:56 AM
- Putting some clarity to a two week bidding war, PMC-Sierra Inc (NASDAQ:PMCS) said Microsemi's (NASDAQ:MSCC) latest stock and cash proposal is not superior to Skyworks Solutions' (NASDAQ:SWKS) all-cash offer, which provides "more value certainty" to shareholders.
- The board of directors continues to recommend the amended and restated merger agreement with Skyworks to its shareholders.
- On Friday, Microsemi hiked its offer to buy PMC-Sierra to about $2.33B, topping a $2.27B proposal from Skyworks Solutions five hours after the latter raised its bid.
- Previously: Microsemi counters Skyworks' new deal for PMC with an $11.88/share offer (Oct. 30 2015)
- Previously: Skyworks, PMC-Sierra strike revised deal topping Microsemi's offer (Oct. 30 2015)
- Previously: Microsemi -6.3% following PMC-Sierra bid; Skyworks -2% (Oct. 19 2015)
- Previously: Microsemi offers to buy PMC-Sierra for $11.50/share, trumping Skyworks' bid (Oct. 19 2015)
Oct. 30, 2015, 12:45 PM
- Just a few hours after Skyworks (SWKS +3%) and PMC-Sierra (PMCS +3.1%) announced they'd agreed to a revised $11.60/share, all-cash, deal (topping Microsemi's $11.50/share bid), Microsemi (MSCC -2.3%) has unveiled an $11.88/share cash/stock offer.
- The offer consists of $9.04/share in cash + 0.0771 Microsemi shares for each PMC share. Microsemi expects a deal to add $0.60 in EPS in its first full year after closing, and to eventually produce over $100M/year in cost synergies. No word on whether Microsemi would foot the bill for the $88.5M termination fee PMC owes Skyworks if it abandons its current deal.
- Microsemi remains lower on the day, while Skyworks and PMC remain higher. PMC is trading near $12.00.
Oct. 30, 2015, 9:10 AM
- 11 days after Microsemi (NASDAQ:MSCC) unveiled an $11.50/share cash/stock offer for PMC-Sierra (NASDAQ:PMCS) that topped Skyworks' (NASDAQ:SWKS) $10.50/share deal with the company, Skyworks and PMC announce they've agreed to a revised $11.60/share, all-cash, deal.
- The termination fee has been hiked to $88.5M from $70M. As previously announced, Skyworks plans to finance the deal with a mixture of existing cash and debt.
- PMCS +2.9% premarket to $11.98, as markets bet the bidding war isn't over. SWKS +0.8% premarket to $75.25.
Oct. 26, 2015, 4:15 PM
- PMC - Sierra (NASDAQ:PMCS): Q3 EPS of $0.13 beats by $0.02.
- Revenue of $133.57M (-1.4% Y/Y) beats by $4.95M.
- Shares +1.03%.
Oct. 25, 2015, 5:35 PM
Oct. 19, 2015, 2:55 PM
- The Street isn't reacting favorably to analog/mixed-signal chipmaker Microsemi's (NASDAQ:MSCC) cash/stock offer to buy storage and telecom IC vendor PMC-Sierra (PMCS +13.7%). Following today's selloff, Microsemi's bid for PMC is worth $11.35/share. With PMC trading at $11.65, investors are betting Skyworks (NASDAQ:SWKS) will up its prior $10.50/share bid.
- S&P thinks Skyworks could raise its offer. However, Brean and Oppenheimer argue the company might walk away. Brean notes Skyworks sold off after the PMC deal was announced amid concerns about a lack of product synergies, and both firms observe Skyworks has taken a disciplined approach to M&A.
- For Microsemi, a PMC deal would further an M&A-driven product line expansion that has led the company to buy medical/telecom IC vendor Zarlink Semi ($525M), timing IC vendor Symmetricom ($230M), and most recently Ethernet chipmaker Vitesse ($389M). The company sees PMC adding over $0.60 to EPS in the first year after closing, thanks partly to over $100M in cost synergies. It would rely on both existing cash and $2.7B in debt to help finance the purchase.
- Raymond James' Mitch Steves has hiked his Microsemi target by $3 to $41 in response to the bid. "Overall, given the $0.60 in year one accretion and material cost savings ... we view the transaction as a positive. In addition, we came away with the following key takeaways from the Conference call: 1) leverage will remain reasonable at ~4x [trailing 12 month] EBITDA, 2) overall business is chugging along with Dec-qtr in-line with Street expectations due to [aerospace/defense]/Military/Industrial strength and 3) Vitesse cost synergies are ahead of plan giving additional comfort on cash flow metrics."
Oct. 19, 2015, 12:43 PM
Oct. 19, 2015, 9:13 AM
Oct. 19, 2015, 7:47 AM
- PMC-Sierra (NASDAQ:PMCS) +10.8% premarket after Microsemi (NASDAQ:MSCC) offers to buy the company for $11.50/share, or ~$2.4B, in an offer MSCC says is a "superior" proposal over last week's $2B offer from Skyworks Solutions' (NASDAQ:SWKS).
- Under MSCC's offer, PMCS shareholders would get $8.75 in cash and 0.0736 of a share of its stock for each PMCS share held; MSCC's offer represents a ~12% premium to PMCS's Friday close and ~50% above PMCS’ price on Oct. 5 before it agreed to the bid from SWKS.
- MSCC says a takeover of PMCS would let it expand its product offering and allow the combined company save more than $100M/year in expenses.
Oct. 6, 2015, 12:57 PM
- Skyworks (NASDAQ:SWKS) has tumbled towards $75 after announcing it's buying storage and telecom IC vendor PMC-Sierra (NASDAQ:PMCS) for $2B in cash on hand. (PR)
- Fellow RF chipmaker Avago (AVGO -6.7%), which (thanks to the LSI acquisition) competes against PMC-Sierra in the storage controller market, is also off, as is merger partner Broadcom (BRCM -3.2%), which competes against PMC to an extent in the telecom IC and network processor markets. RF peer Qorvo (QRVO -3.3%) is also getting hit. The Nasdaq is down 1.2%.
- Possibly hurting the group: Skyworks has used the PMC deal to announce it expects FQ4 (calendar Q3) revenue of $880M and EPS of $1.52. That's slightly above prior guidance of $875M and $1.51 and a consensus of $876M and $1.51, but expectations have been high following a long string of beat-and-raise quarters.
- The PMC acquisition expands Skyworks' reach to a slew of non-RF chip markets and enterprise/telecom infrastructure end-markets. It's expected to yield $75M in cost synergies within 12 months of closing (expected in 1H16), and subsequently boost Skyworks' annual EPS by $0.75. Assuming that target is hit, Skyworks is paying 14x forward EPS.
- Update (1:04PM ET): BofA/Merrill is defending Skyworks and Avago, arguing forward P/Es of less than 10 make shares very cheap.
- Update 2 (5:01PM ET): The group staged a comeback in afternoon trading. Skyworks closed down 1.4%, Avago 3.4%, Qorvo 1.1%, and Broadcom 1.6%. The Nasdaq closed down 0.7%.
Oct. 6, 2015, 12:44 PM