Chip Maker Merger: Skyworks to Buy PMC-Sierra

Jefferies Group cut their price objective on shares of PMC-Sierra from $8.00 to $7.00 and set a “hold” rating on the stock in a research report on Monday, August 31st. The stock has a market cap of $1.99 billion and a PE ratio of 540.00. Craig Hallum initiated coverage on shares of PMC-Sierra in a research note on Thursday, June 4th.

The semiconductor industry had logged over $80 billion in dealmaking this year, which stood higher than every year on record, with the exception of 2000, when M&A in the sector hit $115.5 billion. This price represents a 37% premium to the close of PMC’s stock as of October 5, 2015.

Shares of PMC were up by $2.57 to $10.26 as of Tuesday afternoon.

Skyworks (Woburn, Mass.) said the acquisition would diversify and expand its product portfolio, customer base and target markets. (NASDAQ:PMCS): The stock price is expected to reach $ 9.57 in the short term. The company has a 50 day moving average price of $86.18 and a 200 day moving average price of $96.18.

Skyworks Solutions (NASDAQ:SWKS) last released its quarterly earnings data on Thursday, July 23rd.

The third reason is that Skyworks believes that combining the two companies will result in significant earnings per share accretion and increased shareholder value. They set a “buy” rating and a $14.00 price objective for the company.

For its fiscal Q4, Skyworks preliminarily expects $800 million in revenue and $1.52 in non-GAAP EPS. The company’s revenue for the quarter was up 38.0% compared to the same quarter previous year. Skyworks Solutions has an average rating of “Buy” and a consensus price target of $114.35. During the same period past year, the firm posted $0.83 earnings per share. Four analysts have rated the stock with a hold rating and six have issued a buy rating to the company’s stock.

In a report last week Reuters said PMC-Sierra, which designs semiconductor equipment and develops software solutions for enterprises, cloud data centers and telecom carriers worldwide, was looking for to sell itself.

“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”, David Aldrich, chairman and CEO of Skyworks, said in a statement, adding that the acquisition will broaden its consumer base. The Company supports automotive, broadband, mobile infrastructure, energy management, Global Positioning System (GPS), industrial, medical, military, wireless networking, smartphone and tablet programs.