Microsemi Offers $2.2 Billion for PMC-Sierra, Trumping Skyworks Bid

Chipmaker Microsemi Corp offered to buy PMC-Sierra Inc for about $2.2 billion (roughly Rs. 14,255 crores), trumping a $2 billion (roughly Rs. 12,958 crores) offer by Skyworks Solutions Inc.

PMC-Sierra shares rose 11 percent to $11.38 (roughly Rs. 737) in premarket trading on Monday, below Microsemi's offer price of $11.50 (roughly Rs. 745).

Microsemi, which makes chip equipment and provides software for cloud data, said the deal would help it provide scalable storage services for data centre and cloud applications.

Microsemi said the total value of the deal was $2.4 billion (roughly Rs. 15,547 crores).

The company is offering PMC-Sierra shareholders $8.75 (roughly Rs. 570) in cash and 0.0736 of its shares for each share held.

Microsemi shareholders will own about 85 percent of the combined company, with PMC-Sierra's shareholders owning the rest.

Skyworks, a supplier of Apple Inc, said on Oct. 5 that it would buy PMC-Sierra for $10.50 (roughly Rs. 680) per share in cash.

Microsemi, which made the offer in a letter to PMC-Sierra's board on Friday, said the deal was expected to add 60 cents to its adjusted earnings per share in the first year after the transaction closes.

The company expects to achieve more than $100 million (roughly Rs. 647 crores) in annual cost synergies, of which over $75 million (roughly Rs. 485 crores) is expected in the first full quarter after the deal closes, it said.

The deal is expected to close in December.

Microsemi said in March it would buy Vitesse Semiconductor Corp for $389 million (roughly Rs. 2,520 crores).

Morgan Stanley Senior Funding Inc is providing committed financing for deal, Microsemi said.

Stifel is Microsemi's financial adviser for the deal, while O'Melveny & Myers LLP is its legal adviser.

Microsemi shares closed at $37.36 (roughly Rs. 2,420) on Friday, while Skyworks shares closed at $79.60 (roughly Rs. 5,156).

© Thomson Reuters 2015