Microsemi Corporation (NASDAQ:MSCC) a known provider firm of semiconductor offerings differentiated by performance, power, security and reliability, and PMC-Sierra Inc (NASDAQ:PMCS), a software and semiconductor solutions leader in mobile, storage and optical networks reported that the two companies have entered into a definitive deal.
As per the agreement, Microsemi will buy PMC-Sierra for cash and stock. The deal is valued at nearly $2.5 billion and signifies a 77.4% premium to the closing price of PMC-Sierra’s stock as of September 30, 2015.
The expert view
James J. Peterson, the CEO and Chairman of Microsemi, said that they are delighted PMC-Sierra has accepted their strategic offer, which benefits shareholders of both PMC and Microsemi. They can now shift focus to recognizing the major synergies acknowledged during comprehensive analysis.
He added that as they have previously mentioned, this acquisition will offer Microsemi with a prominent position in scalable storage and high performance solutions, while bringing a complementary portfolio of premium communications products. As the two firms integrate the team and direct profitability, the new entity will benefit from industry-leading margins, increased scale, consolidated infrastructure, substantial cost savings and diversified market exposure.
The deal is projected to be immediately accretive to Microsemi’s as the firm expects achieving over $100 million in yearly cost synergies with more than $75 million to be realized in the first three-months of combined operations. The company currently projects nearly $0.60 of non-GAAP earning per share accretion in the first fiscal after closing the deal of PMC-Sierra acquisition.
Microsemi Corporation (NASDAQ:MSCC) plans to fund the deal and repay its current credit facility with cash, $0.6 billion in company’s common stock and $2.7 billion worth of new transaction debt. Shareholders of PMC-Sierra and Microsemi will own about 15% and 85%, respectively, of the new entity after completion of the deal. Terms of the deal were approved by the boards of both companies.