What: Shares of Pericom Semiconductor (NASDAQ: PSEM) soared on Thursday after the company announced that it was being acquired by Diodes Incorporated (NASDAQ:DIOD). At 12:15 p.m. Thursday, Pericom stock was up about 37%. At that time, Diodes stock was up about 9%.
So what: Diodes is paying $17 per share for Pericom, a 40% premium to the stock's previous closing price. The deal has already been approved by the boards of both companies, and is expected to close during the fourth quarter of 2015.
Following the acquisition, annual revenue for Diodes will be roughly $1 billion. Diodes expects the transaction to lead to operational efficiencies, and its GAAP earnings are expected to be positively affected immediately. Diodes will fund the transaction primarily through debt, drawing down capital from an existing credit facility.
Now what: Pericom's revenue has been largely stagnant for the past decade, and the acquisition gives Pericom a better chance to drive growth, according to Pericom CEO Alex Hui: "Diodes' size and scale provides an excellent platform for our products to gain access to a broader customer base and drive a higher level of growth than Pericom would be able to achieve as a stand-alone company."
Shareholders of Pericom seem to be getting a good price for the company. The offer price of $17 per share is about 32 times fiscal 2015 earnings, and given that EPS has been erratic over the past decade, Pericom's shareholders approving the acquisition appears likely.