Microsemi is offering USD 8.75 in cash and the remainder in its own common shares, valuing PMC-Sierra in total at USD 2.4 billion. The company said the stock element will give PMC-Sierra shareholders the opportunity to benefit also from the longer-term synergies of the merged group. PMC's shareholders would own around 15 percent of the combined company if the deal goes ahead. The other conditions of Microsemi's offer, conveyed in a letter to PMC-Sierra's board, are "substantially the same" as the Skyworks bid, it said. As a further sweetener, it said it could frame the deal as an exchange offer, allowing for a swift closure by December, pending regulatory approvals.
Microsemi said it had already been in talks with PMC-Sierra on a possible offer for 18 months. The acquisition would strengthen Microsemi's position in high-performance and scalable storage products for data centre and cloud applications, while also adding a complementary portfolio of communications products. The company estimates annual cost synergies from the takeover at USD 100 million, of which USD 75 million could be realised in the first full quarter after closing the deal. Excluding one-time costs, Microsemi expects PMC-Sierra would add immediately to EPS and free cash flow. Microsemi plans to take out another USD 2.7 billion in debt to finance the takeover, as well as repay its existing credit facility.
