Dialog Semiconductor to Buy Atmel for $4.6 Billion
21 September 2015 - 12:00PM
Dow Jones News
Dialog Semiconductor PLC announced a $4.6 billion cash-and-stock
deal to buy Atmel Corp., the latest sign that chip makers are
betting on a technology trend called the Internet of Things.
Dialog, a U.K.-based company, sells chips used to manage power
in high-end smartphones from Apple Inc. and others. Atmel, based in
San Jose, Calif., is best known for chips called microcontrollers
that provide computing power for many kinds of consumer and
business hardware.
Jalal Bagherli, Dialog's chief executive, said the deal will
help the company reduce its dependence on a few smartphone makers.
At the same time, he said, acquiring Atmel's customer base and line
of products will make Dialog a major player in chips for connected
cars, wearable devices and other networked gadgets lumped under the
catchall phrase Internet of Things, or IoT.
Atmel had signaled it might be considering a sale on Aug. 24,
when the company said it was extending the retirement date of Chief
Executive Steven Laub through the completion of a strategic review
process. Mr. Laub, who had led the company since 2006, had said in
May that he would retire on Aug. 31.
Investment banker Qatalyst Partners led a sale process that
apparently attracted multiple bidders.
"We won the second round of bidding," Mr. Bagherli said.
The transaction continues a string of combinations in the
semiconductor business, where stock prices have been held down by
slowing growth and companies see advantages in merging product
lines and sales forces.
In the biggest such transaction, Avago Technologies Ltd. in May
agreed to buy Broadcom Corp. for $37 billion. Intel Corp. followed
with a $16.7 billion deal to buy Altera Corp.
Dialog, based near London in Reading, traces its lineage to 1981
and the European operations of a U.S. company called International
Microelectronic Products Inc. Those operations were acquired by
auto maker Daimler-Benz AG and later spun out, with Dialog going
public on the Frankfurt exchange in 1999.
Atmel, founded in 1984, gets about 70% of its revenue from
microcontrollers. The chips are used in applications that include
smartwatches, fitness devices and circuit boards for electronics
tinkerers known by the name Arduino. It also sells chips to help
manage sensors and touch screens in smartphones and tablets.
Mr. Bagherli said Atmel has also developed technology to provide
security for Internet of Things applications. "That is very, very
key for IoT," he said.
In the transaction, Atmel shareholders would receive $4.65 in
cash and 0.112 of a Dialog American depositary share for each Atmel
common share, or the equivalent of $10.42, Dialog said, based on
Dialog's closing price on Friday.
That price represents a 43% premium to Atmel's closing price
Friday, when it traded at $7.27 a share, off 2.2%.
The combined company would have $2.7 billion in annual sales,
Dialog said. Atmel actually has more employees than its
acquirer—5,000 to about 1,500, Mr. Bagherli estimated—which he
attributed to Atmel operating factories to manufacture some of its
chips. Dialog had relied entirely on external manufacturing
services.
Dialog expects the transaction to result in annual savings of
$150 million within two years. The company will fund the takeover
with existing cash, new debt and shares. Both companies' boards of
directors have approved the transaction, which is expected to close
in the first quarter of 2016, Dialog said.
Sarah Sloat contributed to this article
Write to Don Clark at don.clark@wsj.com and Robert Wall at
robert.wall@wsj.com
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(END) Dow Jones Newswires
September 20, 2015 21:45 ET (01:45 GMT)
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