Microchip And ON Semi Propose To Acquire Atmel
MICROCHIP TECHNOLOGY and ON Semiconductor Corporation have sent a proposal to the board of directors of Atmel Corporation to acquire Atmel for $5.00 per share in cash. The proposal, led by Microchip, provides a premium of 52.4 percent to Atmel's closing price of $3.28 on Oct. 1, 2008, and values Atmel at $2.3 billion.
According to a letter to Atmel's board of directors, the acquisition would be led by Microchip and financed in part by the sale of Atmel's nonvolatile memory and RF and automotive businesses to ON Semiconductor.
The preference is to effect a cash transaction, should Atmel stockholders prefer a form of consideration other than cash, including common stock, would be considered. This offer would deliver to Atmel stockholders CY2008 EBIT and CY2008 P/E multiples of 19x and 28x, respectively, based on Wall Street estimates (multiples exclude approximately $60 million of restructuring charges and $25 million of stock-based compensation). It offers Atmel stockholders an attractive return based on these and other financial metrics, when weighed against the challenges in creating shareholder value that Atmel will face if it continues on a standalone basis.
Atmel's underperforming ASIC and auto businesses continue to drag down the company. Although Atmel has made some progress to date in disposing of unproductive fab assets and achieved modest improvements in operating results under a recovery plan, the likelihood and timing of successfully executing on the plan is uncertain. Disposal of unneeded fabs is only the first part of what has been a lengthy and difficult strategic shift for Atmel.
Even in a stable or growing economic environment, successful execution of the company's announced plan is fraught with uncertainty. Against this background of significant execution risk, however, Atmel confronts a rapidly deteriorating U.S. and global macroeconomic environment that will magnify these risks and increase the likelihood of failure.
Although not a condition to Microchip's offer, Microchip intends to dispose of Atmel's ASIC business upon completing the acquisition or shortly thereafter. Microchip is confident that it could divest the business and has engaged recently in discussions with a third party who has expressed interest in acquiring it.
