Bids rise for PMC-Sierra

As expected, Skyworks Solutions, Inc. (NASDAQ: SWKS) and its intended acquisition target, fellow communications silicon vendor PMC-Sierra, Inc. (NASDAQ: PMCS), announced today that Skyworks had increased its offer for PMC in response to an unsolicited counterbid from Microsemi Corp. (NASDAQ: MSCC). It only took Microsemi a few hours to unveil a new bid of its own that again put Skyworks under pressure.

Skyworks and PMC originally announced an acquisition agreement last week that called for Skyworks to pay approximately $2 billion in cash for PMC (see "Skyworks agrees to acquire PMC-Sierra"). However, Microsemi soon announced it had offered the PMC board $2.25 billion for the company (see "Microsemi offers competing bid for PMC-Sierra").

PMC's management acknowledged the bid last Friday. While the company's board said it still supported Skyworks, it conceded that the Microsemi bid might prove superior under the definition contained within its agreement with Skyworks (see "PMC-Sierra: Microsemi acquisition bid may prove superior to Skyworks'").

Skyworks apparently felt the same way. This morning Skyworks and PMC announced that their agreement now called for a price of $11.60 in cash per share of PMC common stock, $1.10 per share more than the previous bid. That put the total price for PMC at approximately $2.27 billion, squeezing past Microsemi's bid. Skyworks also increased the penalty for leaving the agreement, from $70.0 million to $88.5 million.

The increase in the breakup fee did little to dissuade Microsemi from another raise. The company announced soon after the new Skyworks bid became public that it would increase its offer to $9.04 in cash and 0.0771x of a Microsemi common share for each PMC common share, for a total value of $2.3 billion, net of PMC's net cash balance as of Sept. 27, 2015.

"Our revised proposal offers superior value to PMC's shareholders, and Microsemi is uniquely positioned to realize significant synergies," asserted James J. Peterson, Microsemi's chairman and CEO, via a press release. "Our offer is more strategic, offers more certainty in terms of closing approval process and timing, and at a higher price than the Skyworks proposal. Shareholders receive cash now as well as the opportunity to participate in the significant upside potential of a global analog and mixed-signal leader with a highly diversified platform for growth and profitability."

Skyworks has not issued a public response to the Microsemi bid. However, the company clearly must consider either adding to its offer or conceding defeat.

For more information on communications semiconductors and suppliers, visit the Lightwave Buyer's Guide.