Microsemi tops Skyworks bid for chip maker PMC-Sierra

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Suitors are fighting over the storage and networking chip vendor PMC Sierra.

PMC has received an unsolicited proposal from Microsemi Corp. to acquire all of the outstanding shares of PMC common stock in a cash and stock transaction. Under the terms of Microsemi’s proposal, PMC stockholders would receive $8.75 in cash and 0.0736 of a share of Microsemi common stock for each share of PMC common stock held at the close of the transaction.

Based on Microsemi’s stock price at the time of the announcement, the proposal is worth $11.35 per share of PMC common stock – compared to a $10.50 per share in the all-cash deal agreed with Skyworks a few weeks earlier (see Skyworks scoops up PMC-Sierra for $2B).

Microsemi says the combination with PMC-Sierra would bring together complementary optical and switching portfolios and accelerate the companies’ existing plans to grow in data centre markets. In its own words, the company “believes its proposal constitutes a ‘Superior Proposal’ under the terms of PMC's merger agreement with Skyworks”.

The proposal was conveyed in an offer letter to PMC's board of directors on Oct. 19, 2015, together with a copy of a merger agreement, which is on substantially the same terms as the Skyworks merger agreement that Microsemi is prepared to sign. Microsemi is also prepared to amend the transaction structure to an "exchange offer" paving the way for a closing as early as late December 2015.

Microsemi points out that the transaction would be subject to the customary regulatory approvals, but would not be contingent on approval by foreign goverments such as China, as the Skyworks’ deal would be. Of course the deal also needs to be approved by PMC-Sierra shareholders.

Responding quickly, PMC says its board of directors is evaluating Microsemi’s proposal. Although it has not determined whether the proposal is ‘superior’, it has decided that it has a duty to engage in discussions. However, the company notes that there can be no assurances that any definitive agreement or transaction will result from the Microsemi proposal or PMC’s discussions with Microsemi.

In the meantime, PMC’s board of directors continues to recommend the merger agreement with Skyworks to its stockholders. “PMC’s board of directors is not modifying or withdrawing its recommendation with respect to the Skyworks merger agreement and the merger, or proposing to do so, and is not making any recommendation with respect to the Microsemi proposal,” the company said.

Skyworks has not released a statement.

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