Microsemi (Nasdaq: MSCC) has definitely been on an acquisition binge here of late, and now the company is adding Actel (Nasdaq: ACTL) to the stable. Microsemi announced this morning that it was buying Actel in an all-cash deal; offering $20.88 a share. That is not too bad of a premium to pay for MSCC shareholders like me, and the $430 million net cash price will be covered in part by term loan facility and revolver from Morgan Stanley.
Actel specializes in low-power FPGAs and there should be some definite synergies with Microsemi's existing business. In particular, Actel's radiation-tolerant chips should fit in nicely with Microsemi's communications, space, and satellite businesses. Moreover, because Actel is relatively specialized and focused, I do not think Microsemi needs to worry about now competing with Altera (Nasdaq: ALTR) or Xilinx (Nasdaq: XLNX) - two much larger competitors in the overall FPGA segment of the semiconductor market.
Actel was, and is, a largely unknown semiconductor company. It is a small company (note the $430M net price) with effectively no analyst coverage. Nevertheless, the company has been reporting some better quarters of late and seems to have some momentum in the business ... but results have been a little erratic historically. Sales have grown pretty consistently over the past decade, but operating margins have been all over the place (not unusual for semiconductor companies, especially the smaller ones).
All in all, it looks like a good (and logical) deal for Microsemi. I'm a little surprised when companies start showing bursts of acquisition activity, but so far MSCC's deals have made sense and this Actel acquisition should be pretty accretive for the company, and relatively soon at that. Over the longer term, this should deepen (and broaden) MSCC's existing business relationships and may open the door to some new product/market opportunities for the company.
I suppose Actel shareholders might be annoyed at the relatively modest premium for their shares, but that is what happens when a company flies below the radar. If nothing else, maybe Actel shareholders should think about taking the cash from Microsemi and reinvesting it in Microsemi shares - the company is doing well, the business is an intriguing combination of "niche" and "growth", and the stock should still have some room to run.
Oh, by the way ... Lattice Semiconductor (Nasdaq: LSCC) is eerily similar to Actel in a lot of respects (an FPGA company, similar market cap, etc.). I'm not predicting a buyout here, but for anybody looking for "the next Actel", the similarities are there...
Disclosure - I own shares of Microsemi.
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