- Latest offer is $11.88 a share compared with $11.60 bid
- Microsemi proposal gives PMC enterprise value of $2.3 billion
Microsemi Corp. raised its offer for PMC-Sierra Inc. to $11.88 a share, trying to top an upgraded offer by Skyworks Solutions Inc. and escalating a bidding war in a record year for semiconductor industry mergers and acquisitions.
The new bid is $9.04 in cash and 0.0771 of Microsemi’s common stock per share, compared with an all-cash bid of $11.60 a share made earlier Friday by Skyworks. On Oct. 5, Skyworks agreed to buy PMC for $10.50 a share, for what was then a 37 percent premium. Microsemi subsequently intervened, offering $11.50 a share.
“Our revised proposal offers superior value to PMC’s shareholders, and Microsemi is uniquely positioned to realize significant synergies,” Microsemi Chief Executive Officer James Peterson said in a statement. “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.”
Semiconductor makers have pursued mergers at a record pace this year as surging costs for design and manufacturing, coupled with a shrinking customer base, have created a need to bulk up. More than $90 billion in semiconductor deals are pending or have been completed this year worldwide, according to data compiled by Bloomberg.
Microsemi could use stock to offer as much as $15 per share, but is more likely to take the bidding to between $12.50 and $13 a share before walking away, Mitch Steves, an analyst at RBC Capital Markets, wrote in a note to investors. Skyworks, which has no debt, could, if it decided to borrow, make all-cash offers that would exceed what Microsemi could put on the table, Steves wrote.
PMC-Sierra rose 2.4 percent to $11.92 at the close in New York, its highest level since May 2006, indicating that investors expect a higher bid to come. Skyworks rose 3.5 percent to $77.24, while Microsemi fell 2.1 percent to $36.01.
PMC-Sierra makes chips that control drives in network equipment, data-center storage systems and mobile-phone networks. The company, which reported sales declines in two of the past three years, had hired a financial adviser to seek a sale of the company, people familiar with the matter had said.
Skyworks, based in Woburn, Massachusetts, makes chips used in aircraft, automotive and security systems, among others. The company intends to fund the acquisition with cash on hand from the combined companies and fully committed debt financing. Microsemi also makes chips for the military, specializing in parts that can withstand the rigors of environments that include things like radiation what would fry normal semiconductor products.