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Why Integrated Device Technology Stock Jumped Tuesday

By Daniel Sparks - Sep 11, 2018 at 2:55PM

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IDT's rumored buyout looks like the real deal after all.

What happened

Shares of semiconductor company Integrated Device Technology ( IDTI ), or IDT, jumped on Tuesday, rising as much as 11.5%. The stock is up 10.7% as of 2:07 p.m. EDT.

The stock's gain follows news that Japanese chipmaker Renesas has signed a definitive agreement to acquire IDT in an all-cash deal valued at about 733 billion yen, or $6.7 billion. 

A chart showing a stock price moving higher

Image source: Getty Images.

So what

"The acquisition combines two recognized leaders in embedded processors and analog mixed-signal semiconductors," explained Renesas in a press release, "each with unique strengths in delivering products to improve performance and efficiency in high-computing electronic systems."

Today's gain adds to IDT stock's rise on Aug. 31 when news first broke that IDT could be acquired by Renesas. At the time, the deal was rumored to be valued at around $6 billion.

The stock's gain on Tuesday makes sense, as the $6.7 billion deal translates to $49 per IDT share. Even after IDT's rise on Tuesday, shares are trading below $47.

Now what

Renesas expects the deal to be "highly accretive" to its pro forma non-GAAP gross margin, non-GAAP earnings per share, and free cash flow.

Though the boards of directors of both companies unanimously approved the transaction, it is still subject to shareholder votes and regulatory approvals. But Renesas management expects the deal to close sometime during the first half of 2019.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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