Why TriQuint Semiconductor Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of TriQuint Semiconductor (NASDAQ: TQNT  ) jumped more than 26% Monday after the company announced it would merge with RF Micro Devices (NASDAQ: RFMD  ) .

So what: The all-stock transaction, which today's press release describes as a "merger of equals," has already been approved by both companies' boards of directors, and is expected to close in the second half of calendar 2014.

The transaction is also intended to be a tax-free reorganization, and implies a price of $9.73 per TriQuint share. Triquint shareholders will receive 1.675 shares of the new company for each share of Triquint they own, which will collectively result in 50% ownership of the combined company when the transaction is complete.

Now what: Curiously enough, shares of TriQuint closed today at $11.64, or a nearly 20% premium to the merger's implied valuation. However, that seems an optimistic reflection for the post-merger prospects of the combination, which is expected to achieve at least $150 million in cost synergies after the first two years. What's more, the transaction should not only help the two companies better compete with larger competitors like Qualcomm, but is also expected to be accretive to adjusted earnings per share in the first full fiscal year following its close.

All things considered, while I definitely wouldn't buy now, it would be hard to blame Triquint shareholders for hanging onto at least some of their shares after today's pop.

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