Microchip Technology to acquire Micrel

May 8, 2015

Microchip Technology Inc., a provider of microcontroller, mixed-signal, analog, and flash-IP solutions, and Micrel Inc. yesterday announced that Microchip has signed a definitive agreement to acquire Micrel for $14.00 per share. Micrel shareholders may elect to receive the purchase price in either cash or shares of Microchip common stock. The acquisition price represents a total equity value of about $839 million, and a total enterprise value of about $744 million, after excluding Micrel’s cash and investments on its balance sheet of approximately $95 million. This represents a premium to Micrel’s closing stock price as of May 6, 2015, of 3% and a 30% premium to Micrel’s closing stock price on August 7, 2014, the day Starboard Value LP disclosed a 12.0% interest in Micrel in a Schedule 13D filing with the SEC.

“We are pleased to have Micrel become part of the Microchip team. Micrel’s portfolio of Linear and Power Management products, LAN solutions, and timing and communications products, as well as their strong position in the industrial, automotive and communications markets, complement many of Microchip’s initiatives in these areas. We believe that combining Micrel’s business with Microchip’s business will enable significant synergies and cross selling opportunities,” said Steve Sanghi, president and CEO of Microchip Technology. “Ray Zinn founded Micrel and has led the company for the last 37 years. I want to thank Ray for his vision in guiding Micrel from a start-up to almost a quarter billion dollars in annual sales,” added Mr. Sanghi.

“We are excited to join Microchip Technology, a premier company in the semiconductor industry. Microchip has demonstrated consistent profitability, technology leadership and growth in its core businesses. We believe that this acquisition provides the best vehicle for us to realize significant value for Micrel’s shareholders and is a fantastic outcome for our employees and customers, as well as the opportunity to scale up to the much stronger sales and manufacturing platforms of Microchip,” said Ray Zinn, president and CEO of Micrel.

Concurrent with this announcement, Microchip announced that its board of directors has authorized an increase in the existing share repurchase program to 20.0 million shares of common stock from the approximately 2.5 million shares remaining under the prior authorization. Under this program, in the next several months, Microchip intends to repurchase the approximate number of shares it issues in the Micrel acquisition, which is expected to result in the transaction having the accretive effects of a cash transaction from a financial perspective. The acquisition is expected to be mildly dilutive to Microchip’s non GAAP earnings per share immediately after the close, but is expected to be accretive in the first full quarter after completion of the repurchase of the number of shares issued in the transaction.

As previously announced by Micrel, the Micrel Board of Directors created a transaction committee entirely comprised of independent directors on January 20, 2015 to consider a range of strategic alternatives, including a potential sale of Micrel. The process leading up to the merger agreement with Microchip was overseen by the transaction committee, which unanimously recommended the approval of the merger agreement to Micrel’s board of directors.

The acquisition has been unanimously approved by the boards of directors of each company and is expected to close early in the third quarter of calendar 2015, subject to approval by Micrel’s shareholders, regulatory approvals, and other customary closing conditions.

All of Micrel’s directors and certain executive officers have signed voting agreements with Microchip under which they must vote in favor of the merger.

In the proposed transaction, shareholders of Micrel may elect to receive $14.00 per share in cash or $14.00 per share in Microchip common stock, valued at the average closing sale price for a share of Microchip common stock for the ten most recent trading days ending on the second to last trading day prior to the closing. A minimum of 42% of the shares of Micrel common stock will receive shares of Microchip common stock as consideration. If the cash consideration is oversubscribed, the cash election will be subject to proration in accordance with the terms of the merger agreement. The stock component of the consideration is intended to represent a tax-free exchange for U.S. federal income tax purposes.

Wilson Sonsini Goodrich & Rosati, P.C. acted as legal advisor to Microchip. Credit Suisse acted as financial advisor to Micrel, and Davis Polk & Wardwell LLP acted as legal advisor to Micrel.

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