Dialog Semiconductor To Buy Atmel For $4.6 Bln

(RTTNews) - UK-based chip maker Dialog Semiconductor Plc. (DLGNF.PK) has agreed to acquire Atmel Corp. (ATML) for about $4.6 billion in cash and stock, the two companies said Sunday. The transaction will create a provider of both power management and embedded processing solutions with $2.7 billion of combined revenues.

Dialog Semiconductor, whose largest customer is Apple Inc. (AAPL), noted that the transaction would enable it to reduce its dependence on the mobile-phone industry and diversify into automotive markets and network-connected chips used in industrial gear, known as the "Internet of Things".

San Jose, California-based Atmel focuses on embedded systems built around microcontrollers, capacitive touch solutions, and radio frequency components.

Under the terms of the deal, Atmel shareholders will receive $4.65 in cash and 0.112 of a Dialog Semiconductor American depository share or ADS, for each Atmel common share held at close of the transaction.

This will result in the economic equivalent of $10.42 per Atmel share, based on Dialog's closing stock price on September 18. That price represents a 43 percent premium to Atmel's closing stock price of $7.27 per share on that day.

Jalal Bagherli, Chief Executive Officer of Dialog Semiconductor, said, "Our new, enlarged company will be a diversified, high-growth market leader in Mobile Power, IoT and Automotive."

The transaction, approved by the boards of directors of both companies, is expected to close in the first quarter of calendar 2016.

Bagherli will continue to be the CEO and executive board director of Dialog, while two members of Atmel's existing board will join Dialog's board following closing.

Dialog noted that the transaction is not subject to a financing condition. The company intends to fund the transaction with a combination of existing cash, $2.1 billion of new debt and the issuance of about 49 million ADSs expected to be listed on the New York Stock Exchange or the Nasdaq stock market.

Post transaction, Atmel shareholders are projected to own about 38 percent of the combined company.

Dialog expects the transaction to be accretive to its underlying earnings in 2017, the first full year following closing, and also achieve annual cost savings of $150 million within two years.

The deal continues a wave of consolidation in the semiconductor industry this year, as chipmakers grapple with rising costs and weak revenue growth. Intel Corp. (INTC) said in June that it would buy programmable chip maker Altera Corp. (ALTR) for about $16.7 billion in cash.

Mixed signal solutions provider NXP Semiconductors N.V. (NXPI) said in March that it has agreed to buy Freescale Semiconductor Ltd (FSL) for about $16.7 billion in cash and stock.

Avago Technologies Ltd. (AVGO) said in May that it would acquire Broadcom Corp. (BRCM) for $37 billion in cash and stock.

ATML closed Friday's trading at $7.27. In after-hours, the stock gained $0.23 or 3.16 percent to $7.50.

On Frankfurt's XETRA, Dialog's shares closed Friday's trading at $45.33, down $0.95 or 2.05 percent on a volume of 702,757 shares.