Leading semiconductor manufacturer
Microchip Technology Inc.
) recently inked a definitive agreement to acquire integrated
circuits (IC) manufacturer
) for $33 per share in cash. The purchase price equates to a
total equity value of about $394 million and a total enterprise
value of approximately $246 million, after excluding Supertex'
cash and investments to the tune of $148 million.
The acquisition is expected to close in the second quarter of
2014, subject to the fulfillment of mandatory regulatory
approvals. The strategic purchase will enable Microchip to expand
in the Medical, Industrial and Lighting verticals. Microchip is
also expected to leverage Supertex' strong domain knowledge in
high voltage analog and mixed signal technologies to achieve
significant operating synergies and create cross-selling
opportunities. Consequently, the acquisition is anticipated to be
accretive to Microchip's non-GAAP earnings per share in the very
first quarter of its operation post-merger.
However, Supertex' decision to merge with Microchip has stirred
up a hornet's nest as to whether the proposed deal is made in the
best interest of Supertex' shareholders. As such, Robbins Arroyo
LLP, which represents individual and institutional investors in
shareholder rights litigation, is investigating the transaction
to find whether Supertex is undertaking a fair process to obtain
maximum value and adequately compensate its shareholders.
In the third quarter of fiscal 2013 (results declared on Jan 21,
2014), Supertex had recorded healthy year-over-year increases in
net sales, net income and net margin. Net sales increased 21%
year over year to $17.4 million, while GAAP earnings almost
doubled to 23 cents per share from 12 cents per share in the
year-ago period. Earnings also comfortably beat the Zacks
Consensus Estimate by 5 cents. In addition, net margin increased
10% for the first nine months of fiscal 2013 from the comparable
Given the impressive numbers, it is believed that Supertex could
well have prospered on its own instead of merging with Microchip.
Even if the deal is closed, Supertex shareholders possess the
right to file a lawsuit to ensure that the board of directors
obtains the best possible price for its shareholders.
Despite the hoopla, Supertex shares have soared 35.1% to $32.95
at close of trading on Feb 10, while Microchip shares remained
almost flat at $44.76.
Microchip presently has a Zacks Rank #3 (Hold). Players in the
industry that are worth mentioning include
Montage Technology Group Ltd.
NXP Semiconductors NV
), both of which carry a Zacks Rank #2 (Buy).
MICROCHIP TECH (MCHP): Free Stock Analysis
MONTAGE TECH GP (MONT): Free Stock Analysis
NXP SEMICONDUCT (NXPI): Free Stock Analysis
SUPERTEX INC (SUPX): Free Stock Analysis
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