Leading semiconductor manufacturer Skyworks Solutions Inc. SWKS recently expanded its product portfolio and gained a competitive advantage to tap the data center market with the acquisition of PMC-Sierra Inc. PMCS for $10.50 per share. The all-cash transaction valued at approximately $2 billion is expected to close in the first half of the calendar 2016.
The acquisition will expand Skyworks’ product portfolio to better serve some of the fastest growing segments in the technology market, including cloud storage and optical networking. PMC-Sierra’s state-of-the-art storage systems, flash controllers, optical switches and network infrastructure solutions are further likely to cement Skyworks’ position as a premier diversified analog, RF and mixed-signal semiconductor manufacturer.
The data center market is currently witnessing a phenomenal demand for products that store Big Data. In addition to incremental revenues, the acquisition is likely to reap synergistic benefits to the tune of $75 million, resulting in accretive non-GAAP earnings of 75 cents per share on an annual basis for Skyworks.
Skyworks intends to finance the transaction with cash in hand and available debt. Post-acquisition, the company expects annual revenues to swell over $4 billion with gross margin of 55% and operating margin exceeding 40%.
By joining forces with Skyworks, PMC-Sierra is also likely to gain an unrivalled customer pool with a varied product range and large operational scale. This is likely to result in wider global acceptance and deeper market penetration with a large supply chain and distribution network. Each PMC-Sierra shareholder will receive $10.50 in cash for each share held at closing, which represented a 37% premium to the share price at close as of Oct 5, 2015.
Skyworks is continuously on the lookout for strategic acquisitions that will enhance its market share and expand its geographic base. We believe that the current acquisition will also serve the company in good stead to fend off competition from other players in the industry including Avago Technologies Limited AVGO and CEVA Inc. CEVA.
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