Skyworks Solutions, Inc. (NASDAQ: SWKS), a communications silicon vendor primarily focused on wireless applications, plans to expand its scope via the acquisition of PMC-Sierra, Inc. (NASDAQ: PMCS). The analog semiconductor developer says it has agreed to pay $10.50 per share in cash for PMC-Sierra, making the value of the deal approximately $2 billion.
The sale price represents a 37% premium to the price of PMC-Sierra's stock as of market close on October 5, 2015. Skyworks plans to fund the acquisition via cash on hand from the combined companies and new, fully committed debt financing. The closing of the transaction is not subject to financing conditions, the company asserted.
PMC-Sierra supplies silicon for a wide variety of applications, including optical transport hardware (see, for example, "PMC-Sierra DIGI-G4 OTN processor supports 4x100G" and "PMC-Sierra HyPHY chips support OIF’s OTN-over-packet-fabric agreement"). Skyworks sees the proposed acquisition as expanding its product line, customer base, and end-market applications. The company expects annual revenues of more than $4 billion with gross margin in the 55% range and operating margin exceeding 40% once the deal closes, which Skyworks expects to happen in the first six months of 2016.
"With our acquisition of PMC, Skyworks will be uniquely positioned to capitalize on the explosive demand for high-performance solutions that seamlessly connect, transport, and store Big Data," said David J. Aldrich, Skyworks chairman and CEO. "Specifically, we plan to leverage PMC's innovative storage systems, flash controllers, optical switches, and network infrastructure solutions to expand our engagements with some of the world's leading OEMs and ODMs as well as emerging hyperscale data center customers. At a higher level, this complementary yet highly synergistic acquisition is consistent with our stated strategy of diversifying into adjacent vertical markets while leveraging our system-level expertise and global scale."
Aldrich predicted he could find $75 million of synergies as a result of the transaction, which would lead to at least $0.75 of incremental non-GAAP diluted earnings per share on an annual basis.
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