PMC-Sierra Reaches 9-Year High as Microsemi Offers $2.4 Billion

  • Bid of $11.50 in cash and stock exceeds Skyworks offer
  • Combination would help save $100 million in costs a year

PMC-Sierra Inc. reached a nine-year high after Microsemi Corp. offered to buy the maker of semiconductors for network drives for $2.4 billion in cash and stock, topping a bid from Skyworks Solutions Inc.

The offer is $11.50 a share, about 50 percent above PMC-Sierra’s price on Oct. 5, before it agreed to the bid from Skyworks, Microsemi, which is based in Aliso Viejo, California, said in a statement Monday. The Skyworks offer valued PMC-Sierra at $10.50 a share in cash.

“We expect to prevail because our proposal is far superior and will deliver more value to PMC shareholders,” Microsemi Chief Executive Officer James Peterson said on a conference call. PMC needs “a stronger, more definitive management team that could take the company to the next level, and that’s what Microsemi does.”

PMC-Sierra rose 15 percent to $11.73 at the close in New York, its highest point since May 2006. Microsemi declined 5.4 percent to $35.33, while Skyworks fell 2.2 percent to $77.83.

Microsemi, a maker of chips for the communications, security, aerospace and industrial markets, joins Dialog Semiconductor Plc, Intel Corp. and Avago Technologies Ltd. in seeking combinations with rivals amid higher costs and stiffer competition. Microsemi said a takeover of PMC-Sierra would let it expand its product offering and allow the combined company to save more than $100 million a year in expenses.

‘Bidding War’

“A bidding war may ensue,” Gary Mobley, an analyst at the Benchmark Co., wrote in a note to investors. He cited the high value of PMC-Sierra’s assets to both bidders.

PMC-Sierra, based in Santa Clara, California, 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.

Microsemi is offering $8.75 in cash and 0.0736 of its stock for each PMC-Sierra share. The offer’s enterprise value is $2.2 billion, including PMC-Sierra’s net cash balance as of June 27.

Semiconductor makers have pursued deals 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. About $80 billion in global mergers and acquisitions are pending or have been completed in the semiconductor industry this year, according to data compiled by Bloomberg.

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