What: Shares of semiconductor company Atmel (NASDAQ:ATML) soared on Monday after rival Dialog Semiconductor (NASDAQOTH:DLGNF) agreed to buy the company for $4.6 billion. At 12:30 p.m., Atmel stock was up about 13% while Dialog stock was down 16%.
So what: The acquisition of Atmel continues a trend of mergers and acquisitions in the semiconductor industry, with this year being the biggest year for semiconductor deals since 2000, according to Thomson Reuters. Last month, Atmel CEO Steven Laub announced that he would be delaying his retirement as the company worked to complete a strategic review, and the stock surged at the time due to speculation that an acquisition was imminent.
Shares sank last week on a report that China Electronics was in talks to buy the company for $8.50 per share, well below the stock's 52-week high. The Dialog deal, which will see Atmel shareholders receive $4.65 in cash and 0.112 of a Dialog American depository share per Atmel share, values the stock at $10.42, just shy of the 52-week high. Dialog will fund the acquisition with cash on hand, $2.1 billion of debt, and roughly 49 million American depository shares. When the deal is complete, Atmel shareholders will own 38% of the resulting company.
Now what: Dialog expects the acquisition to close during the first quarter of 2016, with $150 million of annual cost savings realized within the first two years. The acquisition of Atmel allows Dialog to diversify into the automotive and industrial industries, decreasing its dependence on its major smartphone clients.
For Atmel shareholders, this deal looks a lot better than the rumored China Electronics deal. Atmel stock peaked in June, and prior to that it hadn't broken the $10-per-share mark since early 2012. Considering that Atmel's revenue and profits have declined over the past few years, the company may have a better chance at growth as part of Dialog.
Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.