Microchip acquiring Microsemi for $8.35bn

2018-03-03

Microcontroller, mixed-signal, analog and Flash-IP solution provider Microchip Technology Inc of Chandler, AZ, USA has agreed to acquire Microsemi Corp of Aliso Viejo, CA, USA (which makes chips for aerospace & defense, communications, data-center and industrial markets, using silicon, gallium arsenide, silicon carbide and gallium nitride technology) for $68.78 per share (representing a total equity value of $8.35bn, and an enterprise value of $10.15bn, after accounting for Microsemi’s cash and investments, net of debt, on its balance sheet at the end of 2017).

“Even as we execute a very successful Microchip 2.0 strategy that is enabling organic revenue growth in the mid to high single digits, Microchip continues to view accretive acquisitions as a key strategy to deliver incremental growth and stockholder value,” says Microchip’s chairman & CEO Steve Sanghi. “The Microsemi acquisition is the latest chapter of this strategy and will add further operational and customer scale to Microchip,” he adds.

“Microchip and Microsemi have a strong tradition of delivering innovative solutions to demanding customers and markets, thus creating highly valued and long-lasting revenue streams,” says Microchip’s president & chief operating officer Ganesh Moorthy. “Joining forces and combining our complementary product portfolios and end-market exposure will offer our customers a richer set of solution options to enable innovative and competitive products for the markets they serve,” he believes.

“This transaction represents a compelling opportunity for Microsemi stockholders, employees and customers by combining the leading embedded control market position of Microchip Technology with the world class power, security, reliability and performance solutions from Microsemi,” states Microsemi’s chairman & CEO James J. Peterson.

The transaction is expected to be immediately accretive to Microchip’s non-GAAP earnings per share. Microchip expects $300m in synergies in the third year after the transaction’s close. The firm plans to finance the acquisition with about $1.6bn of cash from the combined company balance sheets, about $3bn from Microchip’s existing line of credit, about $5bn in new debt and $0.6bn of a cash bridge loan.

The board of directors of each company has unanimously approved the acquisition. Subject to approval by Microsemi stockholders, customary regulatory approvals and other closing conditions, the transaction is expected to close in second-quarter 2018.