LONDON Microchip Technology Inc. and ON Semiconductor Corp. are combining forces in an attempt to acquire Atmel Corp. in a deal that values the latter at $2.3 billion. Microchip is leading the initiative, and the deal would in part be financed by the sale of Atmel's nonvolatile memory and RF and automotive businesses to ON Semiconductor.
The companies plan to offer Atmel shareholders $5 a share in cash, a premium of 52.4 percent to Atmel's closing price on Oct. 1.
It has emerged that the companies have been in discussions about a potential deal since early last month, but the Atmel (San Jose, Calif.) has rejected the early advances.
In an offer letter from Microchip president and CEO Steve Sanghi to his counterpart at Atmel, Steven Laub, Sanghi noted: "We were deeply disappointed to learn that the Atmel Board of Directors appears unwilling to consider a transaction at this time under any circumstances."
Microchip's Sanghi said he preferred a cash deal, but added, "should you feel your stockholders would prefer a form of consideration other than cash, we would consider including common stock as a portion of the consideration."
Microchip (Chandler, Ariz.) says ON Semiconductor (Phoenix) would acquire the assets related to Atmel's nonvolatile memory and RF and automotive businesses immediately prior to the closing of a merger. ON Semiconductor would finance its purchase using a combination of existing cash resources, funds borrowed under its existing credit facility and additional financing.
While not a condition of the offer, Microchip said it intends to dispose of Atmel’s ASIC business after completing the acquisition.
"Microchip is confident that it could divest the business and has engaged recently in discussions with a third party who has expressed interest in acquiring it," Sanghi said.
Sanghi's letter also stressed that Microchip believes "now is the right time to pursue the transaction, and we are committed to moving forward on an expedited basis. Considering the substantial premium and other compelling benefits of this proposal, we are confident that, given the opportunity, Atmel's stockholders and your other stakeholders will enthusiastically support this offer. In light of the foregoing, we ask that you engage us in a meaningful and productive discussion about this proposal promptly and with a sense of urgency."
In a terse release, Atmel confirmed that it has received an unsolicited proposal from Microchip and ON Semiconductor. Atmel said its board ‘’will review and consider the proposal in due course.’’
Morgan Stanley and Credit Suisse are serving as financial advisors, and Wachtell, Lipton Rosen & Katz is serving as legal counsel to Atmel.