Microchip to Buy Standard Microsystems for $939 Million

Microchip Technology Inc. (MCHP), a maker of microcontrollers and memory products, agreed to buy Standard Microsystems Corp. (SMSC) for about $939 million, adding chips used in cars, consumer electronics and computers.

The $37 per share price is 41 percent higher than Standard Microsystems’s closing price of $26.24 yesterday, Microchip said in a statement today. Standard Microsystems’s shares surged 39 percent to $36.43 at the close in New York.

Standard Microsystems’s chips control data transfer components in products ranging from automobiles to home-audio systems and are behind commonly used connections like USB ports. Microchip, based in Chandler, Arizona, expects to expand its role in consumer and industrial markets through the acquisition, according to the statement.

“It’s a little expensive on the Microchip side,” said Vernon Essi, an analyst at Needham & Co. in Boston, who has a buy rating on Standard Microsystems. “It makes sense strategically, because you get a lot of revenue synergy and cross-selling. Definitely there’s consolidation in the semiconductor industry and this is a continuation of what we’ve seen before.”

‘Important Technology’

The acquisition is expected to be completed in the third quarter, Microchip said. The company expects the purchase to boost earnings in the first full quarter after completion. Standard Microsystems has cash and investments of about $173 million.

Microchip fell 0.9 percent to $34.92 in New York. The stock has lost 4.7 percent this year.

The transaction gives Microchip “an important technology that is difficult to develop on their own,” said William Harrison, an analyst with Wunderlich Securities Inc. in Baltimore, who today downgraded Standard Microsystems to hold from buy.

Harrison, who had a 12-month price target of $30 for Hauppauge, New York-based Standard Microsystems, said $37 “is a pretty nice deal for shareholders.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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