Skyworks Solutions Inc (NASDAQ:SWKS), an innovator of high performance analog semiconductors connecting people, places and things, and PMC-Sierra, Inc. (PMC) (NASDAQ: PMCS), a semiconductor and software solutions leader in storage, optical and mobile networks, today announced a definitive agreement under which Skyworks will acquire PMC for $10.50 per share in an all-cash transaction valued at approximately $2 billion. This acquisition solidifies Skyworks’ position as a highly diversified analog, RF and mixed signal semiconductor leader by significantly expanding its product portfolio, customer base and end market applications. Upon completion of the acquisition, Skyworks expects annual revenues of more than $4 billion with gross margin in the 55 percent range and operating margin exceeding 40 percent.
“With our acquisition of PMC, Skyworks will be uniquely positioned to capitalize on the explosive demand for high performance solutions that seamlessly connect, transport and store Big Data,” said David J. Aldrich, chairman and chief executive officer of Skyworks. “Specifically, we plan to leverage PMC’s innovative storage systems, flash controllers, optical switches and network infrastructure solutions to expand our engagements with some of the world’s leading OEMs and ODMs as well as emerging hyperscale data center customers. At a higher level, this complementary yet highly synergistic acquisition is consistent with our stated strategy of diversifying into adjacent vertical markets while leveraging our system-level expertise and global scale. PMC enables us to substantially expand our serviceable market within some of the fastest growing segments in technology including cloud storage and optical networking. Financially, we expect this transaction to create further economic value for our shareholders upon closing, with immediate margin expansion and accretion. After we implement $75 million of synergies, we expect at least $0.75 of incremental non-GAAP diluted earnings per share on an annual basis.”
“The PMC team is excited to join forces with Skyworks to realize our vision of transforming the broader communications landscape through unparalleled product breadth and operational scale,” said Greg Lang, president and chief executive officer of PMC. “Given Skyworks’ deep global sales channels and leadership applications support, underpinned by a world class supply chain, we could not have found a better partner. Together, we plan to develop a wider range of leading-edge solutions for our customers, target new growth vectors and enable some of the most exciting networking and storage platforms in the world, while delivering immediate value for our shareholders.”
Under the terms of the agreement, PMC’s stockholders will receive $10.50 in cash for each share of PMC common stock held at closing. This price represents a 37 percent premium to the close of PMC’s stock as of October 5, 2015.
Skyworks intends to fund the acquisition with cash on hand from the combined companies and with new, fully-committed debt financing. The closing of the transaction is not subject to financing conditions.
The Boards of Directors of each company have approved the transaction, which is expected to close in the first half of calendar 2016, subject to PMC shareholder approval, receipt of regulatory approvals and other customary closing conditions.
Excluding any non-recurring acquisition-related charges and amortization of acquired intangibles, Skyworks expects the acquisition to be immediately accretive to non-GAAP earnings post-closing and will finalize estimates of the transaction’s financial impact as well as the accounting for the transaction upon deal close.
Skyworks Business Update
Based on preliminary results, Skyworks expects to deliver approximately $880 million in revenue and $1.52 of non-GAAP diluted earnings per share for the fourth quarter of fiscal 2015. “Skyworks’ sustained outperformance is being driven by the growing adoption of our integrated mobile systems and new opportunities across the Internet of Things,” said Donald W. Palette, executive vice president and chief financial officer. (Original Source)
Shares of Skyworks Solutions closed yesterday at $81.87. SWKS has a 1-year high of $112.88 and a 1-year low of $44.06. The stock’s 50-day moving average is $86.18 and its 200-day moving average is $95.96.
On the ratings front, Skyworks Solutions has been the subject of a number of recent research reports. In a report issued on October 1, Citigroup analyst Atif Malik initiated coverage with a Buy rating on SWKS and a price target of $115, which implies an upside of 40.5% from current levels. Separately, on September 25, Craig-Hallum’s Anthony Stoss maintained a Buy rating on the stock .
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Atif Malik and Anthony Stoss have a total average return of 8.6% and 21.2% respectively. Malik has a success rate of 47.8% and is ranked #1074 out of 3770 analysts, while Stoss has a success rate of 58.3% and is ranked #425.
Overall, 10 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $122.13 which is 49.2% above where the stock closed yesterday.
Skyworks Solutions Inc, together with its consolidated subsidiaries is an innovator of high reliability analog and mixed signal semiconductors.