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24 November 2015

Microsemi to acquire PMC-Sierra for $2.5bn after outbidding Skyworks

Analog and mixed-signal semiconductor maker Skyworks Solutions Inc of Woburn, MA, USA says that it has decided not to modify its amended and restated merger agreement with PMC-Sierra Inc of Sunnyvale, CA, USA (which provides semiconductor and software solutions for storage, optical and mobile networks), entered into on 29 October. PMC has terminated the agreement (entitling Skyworks to an $88.5m termination fee from PMC).

On 5 October, Skyworks offered to acquire PMC for $10.50 per share. On 19 October, Microsemi Corp of Aliso Viejo, CA, USA (which makes chips for the communications, security, aerospace and industrial markets) made a rival unsolicited offer to acquire PMC for $8.75 in cash and 0.0736 of a Microsemi share for each share of PMC common stock (amounting to $11.35 per PMC share). Then, on 29 October, PMC announced an amended and restated merger agreement for Skyworks to acquire it for $11.60 per share. In response, Microsemi made a revised offer of $9.04 in cash and 0.0771 of a Microsemi share for each share of PMC common stock (amounting to $11.88 per PMC share). PMC subsequently noted that this amounted to $11.77 per PMC share based on the closing price of Microsemi common stock on 13 November (rather than 29 October) and that its board continued to recommend the amended and restated merger agreement with Skyworks to its stockholders.

However, a subsequent revised proposal from Microsemi offered $9.22 in cash plus 0.0771x of a Microsemi share for each PMC share (amounting to $12.05 per PMC share – a 77.4% premium to PMC's closing stock price as of 30 September - valuing PMC at $2.5bn). On 19 November, Microsemi said it had been informed that its revised proposal to acquire PMC constitutes a 'Superior Proposal' under the terms of PMC's merger agreement with Skyworks, and that the PMC board had given written notice to Skyworks of its intent to approve or recommend the latest Microsemi proposal.

Skyworks now says that, at an increased valuation, PMC no longer meets Skyworks' financial criteria, adding that its increased mid-term target operating model remains unchanged from the annualized non-GAAP earnings per share of $8.00 it provided on 5 November.

Microsemi says that the deal (which has been approved by the boards of both Microsemi and PMC-Sierra) did not require the approval of its shareholders. The offer "benefits shareholders of both Microsemi and PMC," says Microsemi's chairman & CEO James J. Peterson. "We can now shift our focus to realizing the significant synergies," he adds. The firm expects the transaction to achieve more than $100m in annual cost synergies (including more than $75m in the first full quarter of combined operations) and estimates approximately $0.60 of non-GAAP EPS accretion in the first full year after closing.

"This acquisition will provide Microsemi with a leading position in high-performance and scalable storage solutions, while also adding a complementary portfolio of high-value communications products," says Peterson. "As we integrate the team and drive profitability, our combined company will benefit from increased scale, industry-leading margins, diversified market exposure, consolidated infrastructure and substantial cost savings."

Microsemi intends to fund the transaction and repay its existing credit facility with existing cash, $2.7bn in new transaction debt and $0.6bn in Microsemi common stock. Shareholders of Microsemi and PMC will own about 85% and 15%, respectively, of the combined entity after completion of the transaction.

See related items:

PMC-Sierra reiterates commitment to Skyworks transaction

Microsemi's proposal to acquire PMC deemed a superior proposal by PMC board

PMC receives increased unsolicited offer of $11.88 per share from Microsemi

Skyworks increases offer to acquire PMC-Sierra from $10.50 to $11.60 per share

Skyworks to acquire PMC-Sierra for $2bn

Skyworks' quarterly revenue ris es a more-than-expected 38% year-on-year to $810m

Tags: Microsemi Skyworks

Visit: www.pmcs.com

Visit: www.microsemi.com

Visit: www.skyworksinc.com

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