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Why Magnachip Stock Skyrocketed on Friday

By Evan Niu, CFA - Mar 26, 2021 at 12:30PM

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The South Korean semiconductor company is going private in a $1.4 billion deal.

What happened

Shares of Magnachip (MX 2.56%) skyrocketed in early trading Friday after the company announced that it is going private in a $1.4 billion deal. Private equity fund Wise Road Capital has agreed to acquire the South Korean chip specialist. As of 11:20 a.m. EST, the stock was up by 27.1% to $25.95.

So what

Wise Road will be acquiring Magnachip shares for $29 per share in cash, which represents a premium of 75% over the stock's 3-month volume-weighted average share price, and a 54% premium compared to the closing price on March 2, before rumors broke that the semiconductor company was pursuing a sale.

Green stock chart going up

Image source: Getty Images.

"This transaction is in the best interests of all of our stakeholders, including shareholders, customers and employees," Magnachip CEO YJ Kim said. "It will provide an excellent opportunity to accelerate our MX 3.0 growth strategy."

Now what

Wise Road plans to help Magnachip implement its long-term strategy to expand in the display and power markets. The deal, which has been unanimously approved by Magnachip's board of directors, but still requires shareholder approval, is expected to close in the second half of the year. The stock is currently trading at a discount to the offer price.

Magnachip warned last month that the chip industry continues to suffer from severe supply constraints, which the company is working to address. Management had issued guidance calling for first-quarter revenue in the range of $119 million to $124 million, but investors will now be more focused on getting the deal closed.

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