Leading semiconductor manufacturer
Microchip Technology Inc.
) recently inked an agreement to acquire ISSC Technologies
Corporation, a low power Bluetooth and advanced wireless solutions
provider for the Internet of Things, to supplement its presence in
these niche markets. The acquisition is likely to be completed by
the fourth quarter of calendar-year 2014, subject to the
fulfillment of mandatory closing conditions.
Taiwan-based ISSC had net sales of $69.2 million with an operating
margin of 18.9% in 2013. The transaction is expected to be
accretive to Microchip's non-GAAP earnings from the very first
quarter of its operation.
Under the terms of the agreement, Microchip will initiate a tender
offer to acquire all the outstanding shares of ISSC for
approximately $4.74 per share in cash. This equates to a total
equity value of about $328.5 million and a total enterprise value
of about $294.3 million, after excluding cash and investments of
approximately $34.2 million.
The transaction offers ISSC the opportunity to reap the benefits of
economies of scale owing to the much stronger sales and
manufacturing platforms of Microchip. On the other hand, the
strategic purchase complements Microchip's initiatives in the
wireless market, by leveraging ISSC's deep domain knowledge in
Bluetooth and wireless technologies to enable significant
cross-selling opportunities. The transaction, therefore, is a
win-win deal for both the companies.
This is the first major foreign acquisition by Microchip. The
transaction is expected to be funded with Microchip's foreign cash
reserves and will not entail any additional borrowings from its
line of credit.
Microchip develops and manufacturers microcontrollers, memory and
analog and interface products for embedded-control systems, which
are small, low-power computers designed to perform specific tasks.
Striking features such as quality, performance, reliability, ease
of use, pricing and diversity of products have been its forte,
making it one of the well-positioned companies in the semiconductor
Microchip presently has a Zacks Rank #2 (Buy). Other players in the
industry that are worth considering include
Advanced Semiconductor Engineering Inc.
Amkor Technology, Inc.
), each carrying a Zacks Rank #2 (Buy).
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