What happened
Shares of Silicon Motion Technology (SIMO 1.60%), a developer of NAND flash controllers, jumped sharply on Thursday even as many other stocks tanked. At its high point during the trading day, shares were up 21.5%. As of 3:07 p.m. ET, that gain had moderated slightly to about 16.7%.
The tech stock's sharp gain was driven by the announcement of an agreement to sell the company to chipmaker MaxLinear (MXL 0.72%). Investors in MaxLinear, however, didn't seem to like the deal. Its stock price had plummeted more than 21% as of this writing.
So what
For every share of Silicon Motion, MaxLinear has agreed to pay shareholders $93.54 in cash and 0.388 shares of MaxLinear. This translates to a premium of approximately 48% to the market value of Silicon Motion's stock on April 22. In total, the deal values Silicon Motion at $3.8 billion.
According to the buyer's press release announcing the deal, the "[a]ddition of Silicon Motion's NAND flash controller technology and customer relationships complements MaxLinear's leadership in Broadband, Connectivity, and Infrastructure markets."
Image source: Getty Images.
Now what
Investors in MaxLinear apparently think the company may be overpaying for Silicon Motion. Or they may disagree about the value of the potential synergies the deal will create. At least that's what is implied by MaxLinear stock's sharp decline following this announcement.
There are also still risks that this deal may not close, as it is subject to the "satisfaction of customary closing conditions, including Silicon Motion shareholders' approval and regulatory approvals in various jurisdictions," the press release noted.
