CSR Goes on the Block for Chipmakers: Real M&A

CSR Plc is now in play for potential buyers including Texas Instruments Inc. and Broadcom Corp.

The U.K. chipmaker soared more than 35 percent yesterday after rejecting a bid from Microchip Technology Inc. and saying it would consider its options. With yesterday’s gains, the $2.1 billion company is already trading above the takeover price implied by the average premium for similar deals in the last five years, according to data compiled by Bloomberg.

CSR’s foothold in Bluetooth wireless technology gives it an attractive position in the growing market for Web-connected devices across homes, cities and workplaces, known as the Internet of Things. That may entice semiconductor makers such as Texas Instruments and Broadcom, and possibly even Apple Inc., which is competing with Google Inc. to develop devices for smart homes, said Liberum Capital Ltd. Under U.K. takeover rules, Microchip has until Sept. 25 to say whether it wants to keep pursuing a transaction, which probably requires a higher bid.

“They’ve got the for-sale sign up above the door,” Eoin Lambe, a London-based analyst at Liberum, said in a phone interview. “It is a play on the connected home, it’s a play on smart cars, it’s a play on the Internet of Things, which is the exposure everybody needs right now.”

A representative for Cambridge, U.K.-based CSR declined to comment beyond the company’s statement yesterday.

Microchip’s Move

CSR turned down the price proposed by Microchip Technology, without specifying what the Chandler, Arizona-based computer chipmaker had offered.

Microchip Technology, a $9.6 billion semiconductor maker, has a chance to come back with a higher offer. Rules governing acquisitions in the U.K. give the company about a month to decide if it wants to keep pursuing the purchase or shelve takeover talks with CSR for six months. With the revelation of Microchip Technology’s bid, other suitors also may emerge, said Anand Srinivasan of Bloomberg Intelligence.

“They have a tangible portfolio of intellectual property that is marketable, if not to Microchip, then to somebody else,” Srinivasan said in a phone interview. “If not at that price, then at a different one.”

Better Premium

Semiconductor makers that sold themselves for more than $1 billion in the last five years have drawn an average premium of

34.5 percent, according to data compiled by Bloomberg. If the same premium were applied to CSR’s 20-day average price through Aug. 27, it would imply a price of about 726 pence a share in a sale.

The chipmaker yesterday closed about 7 percent higher than that at 780 pence, suggesting it may command one of the industry’s top valuations.

CSR’s products are used in smartphones, cars and personal navigation devices, and the company is taking advantage of growing demand for Web-connected gadgets that can control everything from thermostats to centrally linked industrial equipment. The market for the Internet of Things will swell to $7.1 trillion by 2020, up from $1.9 trillion in 2013, according to estimates from researcher IDC.

“CSR is in the right spot with its product portfolio and strategy,” Francois Meunier of Morgan Stanley wrote in a report yesterday. It’s a leading manufacturer of Bluetooth smart chips and is poised to benefit from pent-up demand for connected home products, Meunier said.

Left Field

Other interested suitors may include Texas Instruments and Broadcom or “more left-field” buyers such as Apple, said Lambe of Liberum.

Google this year acquired digital thermostat maker Nest Labs Inc. to boost its offerings for the connected home. It also announced a deal via Nest for Dropcam Inc., which makes in-home security cameras that can be checked from smartphones. Apple could use CSR’s technology to add to its own products for the Internet of Things, though it may be less interested in the company’s automotive business, Lambe said.

Intel Corp. and Taiwanese chipmaker MediaTek Inc. may also be interested in a CSR takeover, he said.

A representative for Dallas-based Texas Instruments said the company doesn’t comment on speculation. A spokesman for Santa Clara, California-based Intel didn’t have an immediate comment. Representatives for Irvine, California-based Broadcom and Cupertino, California-based Apple didn’t respond to requests for comment, nor did MediaTek when contacted after normal business hours.

For Srinivasan of Bloomberg Intelligence, there’s “logic in multiple buyers trying to make a go for CSR.”

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