Wireless semiconductor supplier Skyworks Solutions has agreed to buy PMC-Sierra in an all-cash transaction valued at approximately $2 billion.
Under the terms of the agreement, Skyworks will pay PMC’s stockholders $10.50 per share, representing a 37 per cent premium on the stock price as of the close of trading on 5 October.
Semiconductor vendors are under tremendous pressure to consolidate and expand into new markets, which has led to a number of prominent acquisitions that affect the optical industry, including Avago buying Broadcom, (see Avago Technologies to buy Broadcom for $37B) and Intel absorbing Altera (see Intel agrees $16.7B purchase of FPGA maker Altera).
These factors are also behind the Skyworks deal. In a statement, David J. Aldrich, chairman and chief executive officer of Skyworks, said: “This complementary yet highly synergistic acquisition is consistent with our stated strategy of diversifying into adjacent vertical markets while leveraging our system-level expertise and global scale.”
Skyworks, best known as a supplier of wireless handset chips to Apple, wants to expand its role in the data centre market. The company hopes to position itself as a supplier of semiconductors that enable end-to-end connectivity, internet infrastructure and hyperscale data centres.
“With our acquisition of PMC, Skyworks will be uniquely positioned to capitalize on the explosive demand for high-performance solutions that seamlessly connect, transport and store Big Data,” said Aldrich.
“Specifically, we plan to leverage PMC’s innovative storage systems, flash controllers, optical switches and network infrastructure solutions to expand our engagements with some of the world’s leading OEMs [original equipment manufacturers] and ODMs [original design manufacturers] as well as emerging hyperscale data centre customers. At a higher level, PMC enables us to substantially expand our serviceable market within some of the fastest growing segments in technology including cloud storage and optical networking,” he added.
Skyworks expects to achieve $75 million of synergies within 12 months, and expects to add at least $0.75 of non-GAAP diluted earnings per share on an annual basis.
Upon completion of the acquisition, Skyworks expects annual revenues of more than $4 billion with gross margin in the 55 percent range and operating margin exceeding 40 percent.
“The PMC team is excited to join forces with Skyworks to realize our vision of transforming the broader communications landscape through unparalleled product breadth and operational scale,” said Greg Lang, president and chief executive officer of PMC.
Skyworks intends to fund the acquisition with cash on hand from the combined companies and with new, fully-committed debt financing. The deal is not subject to financing conditions.
The acquisition, which is subject to approval by PMC’s board of directors and other customary approvals, is expected to close in the first half of calendar 2016.