Synaptics Inc. surged 29 percent to a record after the touch-screen technology provider agreed to buy display chipmaker Renesas SP Drivers Inc., combining products in high demand from phone and tablet makers.
The San Jose, California-based company is paying $475 million for Japan’s Renesas SP Drivers, according to a statement yesterday. Synaptics’s shares jumped to $85.78, the highest since going public in 2002, at the close in New York.
The deal will help Synaptics expand in the fast-growing Chinese market and make it attractive to manufacturers seeking suppliers that can handle major chunks of their engineering, said Osten Bernardez, an analyst at Cross Research. Demand for Synaptics’s chips, which control touch screens and touch pads, is driven by the rising appetite for mobile computing and the addition of touch capabilities to mainstream PC software such as Microsoft Corp.’s Windows 8 operating system.
“They’re expanding their addressable market and acquiring an asset that’s been growing revenues at a rapid clip,” said Bernardez, who recommends buying the stock. “They’re providing a unique capability when combined with Synaptics know how in touch.”
The transaction gives Renesas SP Drivers an enterprise value of $515 million, or about 0.8 times revenue, compared with the 1.82 times the median for 37 chip company acquisitions over the past three years, according to figures in the statement and data compiled by Bloomberg.
The relatively low price may indicate that it has lost Apple Inc. as a customer for future phones, said Ashok Kumar, an analyst at Imperial Capital LLC.
“If Renesas had a great pipeline, why would they sell out at a fraction of sales?” Kumar said.
Ann Minooka, a spokeswoman at Synaptics, didn’t immediately return a call seeking comment.
Apple, the maker of iPads and iPhones, was in talks to buy Renesas SP Drivers for as much as $1 billion, the Wall Street Journal reported April 2, citing people familiar with the matter.
Synaptics’s largest customer is Samsung Electronics Co., according to data compiled by Bloomberg. The maker of Galaxy S phones accounted for 14 percent last year, followed by Flextronics International Ltd., with 8.7 percent, the data show. Apple represented less than 0.5 percent of its sales.
“The acquisition opens up a large market for Synaptics,” Chief Executive Officer Rick Bergman said today at a briefing in Tokyo.
Renesas SP Drivers is 55 percent-owned by Japan’s Renesas Electronics Corp., itself 70 percent owned by the government-backed Innovation Network Corp. of Japan. Sharp Corp. owns a 25 percent stake in Renesas SP Drivers.