Microsemi wins competition for PMC-Sierra

Microsemi Corp. (NASDAQ: MSCC) says it (finally) has signed a definitive agreement to acquire fellow communications semiconductor vendor and PMC-Sierra, Inc. (NASDAQ: PMCS). Microsemi outlasted competition from Skyworks Solutions, Inc. (NASDAQ: SWKS), which originally had reached an acquisition agreement with PMC in October (see "Skyworks agrees to acquire PMC-Sierra").

Skyworks announced it had thrown in the towel last night in the face of what turned out to be the winning bid from Microsemi: $9.22 in cash and 0.0771 of a share of Microsemi common stock for each share of PMC common stock. Microsemi will pay approximately $2.5 billion, a 77.4% premium on the closing price of PMC's stock as of September 30, 2015.

Skyworks' final offer was $11.60 per PMC common share in cash, a total value of $2.27 billion (see "Bids rise for PMC-Sierra").

"Skyworks maintains a highly disciplined approach to the assessment of potential acquisition candidates, and at an increased valuation, PMC no longer meets Skyworks' financial criteria," the company said in last night's statement. Skyworks will console itself with an $88 million breakup fee from PMC.

"We are pleased PMC has accepted our compelling strategic offer, which clearly benefits shareholders of both Microsemi and PMC. We can now shift our focus to realizing the significant synergies identified during our comprehensive analysis," said James J. Peterson, Microsemi's chairman and CEO.

Microsemi expects those annual synergies will reach more than $100 million, with greater than $75 million realized in the first full quarter of combined operations. The company also anticipates the new assets to be immediately accretive to non-GAAP earnings per share (EPS) and free cash flow. Microsemi pegs non-GAAP EPS accretion at approximately $0.60 in the first full year after the transaction closes.

Microsemi will fund the purchase and repay its existing credit facility with existing cash, $2.7 billion in new transaction debt, and $0.6 billion in Microsemi common stock. Shareholders of Microsemi approximately 85% and PMC 15% of the combined company.

The deal, which does not require approval by Microsemi's shareholders, is expected to close in the first quarter of calendar 2016. The boards of the two companies have approved the purchase agreement, despite the fact that the PMC board had twice stated its preference to work with Skyworks (see "PMC-Sierra board rejects Microsemi bid, backs Skyworks" and "PMC-Sierra board flip flops again, now backs Skyworks bid").

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