Semiconductor maker Atmel Corporation ATML, which inked a merger agreement with Dialog Semiconductor Plc this September, acknowledged the receipt of an unsolicited bid that could trump Dialog’s offer terms. Atmel’s shares soared almost 9% in extended trading, hitting $9.20 a share before sliding down to close at $8.46.
The chipmaker thinks that the new offer might result in a deal superior to Dialog’s proposal under the merger agreement. Dialog had agreed to pay $4.65 in cash and 0.112 of a Dialog ADR (American Depository Receipt) for each share of Atmel’s stock. Based on the current prices, the offer comes to about $8.81 a share.
The new unsolicited bid offers Atmel $9 in cash for each share of the company, along with the option to receive shares of the acquirer in an amount of up to $1.0 billion in total value, in lieu of cash.
Atmel’s directors have confirmed that they will engage in buyout talks with the potential acquirer, in order to determine if it is comparatively more financially favorable for its shareholders. However, the San Jose, CA.-based company still endorses the Dialog merger and advises against the unsolicited new offer, as there is no certainty that the bid will result in a deal.
Based in Reading, England, Dialog manufactures chips used to manage power in high-end smartphones, including those made by Apple Inc. AAPL. In fact, Apple now accounts for about 78% of Dialog’s revenue. The Atmel acquisition will help Dialog to expand its product portfolio with complementary products that cater to the automotive industry and power the Internet of Things, thus reducing its reliance on mobile phones.
The Atmel-Dialog deal was part of a record year for semiconductor mergers, and the unsolicited bid is the latest example of rising bids and drawn-out skirmishes in the semiconductor space. The rapidly-consolidating industry has seen an astonishing $110 billion in deals this year, as companies merge to battle mounting costs of production, slowing growth and a shrivelling customer list.
Atmel had also attracted an offer from fellow chipmaker Cypress Semiconductor Corporation CY, after it announced that it was considering strategic options in August.
Atmel currently has a Zacks Rank #3 (Hold). A better-ranked semiconductor company is Silicon Motion Technology Corp. SIMO, sporting a Zacks Rank #1 (Strong Buy).
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