MACOM Technology Solutions Holdings, Inc. (NASDAQ: MTSI) has dipped into its wallet again, this time to acquire communications semiconductor supplier Applied Micro Circuits Corp. (NASDAQ:AMCC). MACOM will pay approximately $8.36 per share -- $3.25 in cash and 0.1089 MACOM shares per share -- for AppliedMicro. The total transaction value is approximately $770 million.
AppliedMicro offers silicon for both connectivity and compute applications. MACOM says it plans to divest the compute product line within 100 days after the deal closes, a milestone the company expects to reach in the first calendar quarter of 2017. AppliedMicro has already explored strategic alternatives for the compute line and "there is known strategic interest among several potential buyers and investors," MACOM asserts via a press release.
The remaining business includes silicon for Optical Transport Network (OTN) applications as well as devices for PAM4 communications applications and MACsec Ethernet networking (see, for example, "AppliedMicro ships 100G OTN transponder/muxponder chip" and "AppliedMicro demos single-wavelength 100G PAM4 silicon").
"This transaction will accelerate and expand MACOM's breakout opportunity in enterprise and cloud data centers," aserts John Croteau, MACOM's president and CEO. "MACOM will now be able to provide all the requisite semiconductor content for optical networks -- analog, photonic, and PHY -- from the switch to fiber for long haul, metro, access, backhaul, and data center. AppliedMicro's 100G to 400G single-lambda PAM4 platform should perfectly complement MACOM's leadership in analog and photonic components for data centers."
Croteau cited AppliedMicro's SerDes and high speed analog-to-digital and digital-to-analog converter products as appealing as well.
The offering price represents a 15.4% premium over AppliedMicro's share closing price of $7.25 on Friday, November 18. The cash portion of the transaction will come from cash on hand. AppliedMicro shareholders will own approximately 15% of the combined company upon the deal's consummation.
Even with the compute business divested, MACOM expects the acquisition to be accretive to its non-GAAP gross margin, non-GAAP operating margin, and non-GAAP EPS during its fiscal year that ends September, 2017. MACOM also will benefit from more than $600 million of tax net operating loss carry forwards.
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