Dialog Semiconductor to acquire Atmel for $4.6B

Atmel specialises in the manufacture of microcontrollers that offer connected solutions to customers in the industrial, automotive, consumer, communications and computing markets.

Investment banker Qatalyst Partners led a sale process that apparently attracted multiple bidders.

The transaction continues a string of combinations in the semiconductor business, where stock prices have been held down by slowing growth and companies see advantages in merging product lines and sales forces. Last May for example, Avago Technologies Ltd. announced it was planning to acquire another chipmaker, Broadcom Corp.in a cash-plus-stock deal worth $37 billion that’s set to complete by March 2016. Those operations were acquired by auto maker Daimler-Benz AG and later spun out, with Dialog going public on the Frankfurt exchange in 1999.

Atmel was started in 1984 by former Intel design engineer and Seeq Technology Inc. founder George Perlegos. It also sells chips to help manage sensors and touch screens in smartphones and tablets. “That is very, very key for IoT“, he said.

Dialog said this acquisition will complement its leadership position in Power Management ICs with a leading portfolio of proprietary and ARM based Microcontrollers in addition to high performance ICs for Connectivity.

Following this transaction, shareholders at Atmel will have 38% of this combined new group, said Dialog.

Dialog said Sunday that shareholders at Atmel would be given $4.64 in cash as well as 0.111 of a share of Dialog semiconductor for every common stock share of Atmel, equal to $10.42 a share at Atmel based on the closing price of Dialog on September 18.

Dialog is a “fabless” company, meaning it does not operate any manufacturing plants, and instead contracts the production of its chips to other companies. Dialog expects to pay down the transaction debt about three years after closing.

The transaction, expected to close during the first quarter of 2016, will boost Dialog’s earnings in 2017, Dialog said, and result in annual cost savings of $150 million within two years.