Seeking Alpha: Microchip Technology And Atmel The Right Match

It's been a while since I've written on Microchip Technology (NASDAQ:MCHP), mostly because I have thought this well-run MCU and analog chip company was pretty fairly priced in the market and didn't offer all that much opportunity. While some in the peanut gallery didn't like it when I last wrote in May of 2014 that I preferred Atmel (NASDAQ:ATML) (a smaller, less well-run MCU player), Microchip is down about 14% over that period while Atmel has fallen less than 4%.

Now these two players are looking to tie themselves together permanently. Although I've thought for a while that Atmel could be a M&A target, I was surprised to see Dialog (OTC:DLGNF) step up given the questionable synergies. Dialog shareholders weren't too pleased either, and the erosion in value of Dialog shares kept a window of opportunity open for Microchip. Together, Microchip and Atmel will be the #3 MCU company in the world (trailing Renesas (OTCPK:RNECY) and NXP Semicondcutors (NASDAQ:NXPI) after its deal for Freescale), and Microchip will have a very fertile opportunity to drive margin synergies.

While the merger is not a done deal (so there is risk to deal closure), I believe Microchip's fair value climbs into the low $50's with Atmel in hand. Buying any stock feels like a bold move right now, but I believe Microchip has a strong record of driving cost savings from acquired properties (a primary driver of value in this deal) and a strong record of overall operating execution.

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Microchip Technology And Atmel The Right Match