William Trent_

More Negativity on the LSI Logic-Agere Merger

It isn't. However, there have been at least three breathless sell-side reports issued on "likely semiconductor buyout candidates." My point is just that if you are buying semiconductor companies for a buyout you could be disappointed, and the LSI/AGR merger shouldn't count as evidence that the buyout theme is working.

I think we do agree on the overall consolidation theme.

More Negativity on the LSI Logic-Agere Merger

Sorry. Apparently I don't know how to embed a link in the comment section.

More Negativity on the LSI Logic-Agere Merger

I'm not really trying to apply PE logic to a merger, just to illustrate why this differs from a cash buyout from an investor's perspective. There are tons of rumors about what chipmaker is going to be bought next. If you buy one at 14x EBITDA hoping they will be bought out at a premium you are either dreaming or will get stock in a company you haven't bargained for.

There are two ways for the arbitrage to go away. Agere could go up or LSI could go down. There is a very specific reason I am not "fully pricing" Agere, and that is because there is no such thing right now.

As to the synergies, I am neither purposely including them or purposely ignoring them. If you look at other mergers such as or a href="stockmarketbeat.com/bl.../" title="Valassis/Advo" /a> the combined EV rose on the announcement, suggesting the market believed in the synergies. When the combined value of the two companies declines, as in this case, it suggests that, at the very least, the market is skeptical of the synergies.

I agree that the semi industry needs to consolidate. I have said so Where we may (or may not) differ is on whether we think it will be through cash buyouts.