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Dc19868
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Microsemi buys Actel for $430 million
Mark Lapedus
10/4/2010 1:10 AM EDT
SAN JOSE, Calif. - Microsemi Corp. has entered into the FPGA market.
The analog and mixed-signal chip maker has entered into a definitive agreement to acquire Actel Corp. for $20.88 per share through a cash tender offer. The total transaction value is approximately $430 million, net of Actel's projected cash balance at closing.
Based in Mountain View, Calif., Actel is a supplier of field programmable gate arrays (FPGAs). Actel competes against Altera, Lattice, SiliconBlue and Xilinx. Now, Microsemi will compete in the tough FPGA fray.
Observers were scratching their heads about the deal. It was a complete surprise. Analog and FPGAs are completely different markets.
"We believe the addition of Actel will deliver compelling synergies to Microsemi," said James J. Peterson, Microsemi's president and chief executive, in a statement.
"Actel will bring the most widely-used mixed-signal, radiation tolerant FPGA products in the aerospace and defense markets today, and the company's products will allow Microsemi to extend its growing system-level capabilities,'' he said. ''As Microsemi continues to move up the value chain in offering its customers system solutions that are better, faster, and more-cost effective than they can build themselves, Actel's highly-integrated solutions will be an integral component in enabling this growth."
Microsemi expects significant synergies from this immediately accretive transaction. Based on current assumptions, Microsemi expects the acquisition to be $0.22 to $0.28 accretive in its first full calendar year ending December 2011.
For the September quarter, net sales for Microsemi are expected to range from $146 to $150 million. As of this date, Microsemi remains comfortable with its previously announced non-GAAP diluted earnings per share guidance for its fourth fiscal quarter 2010 of $0.33 to $0.35.
No approval of the shareholders of Microsemi is required in connection with the proposed transaction. Terms of the agreement were unanimously approved by the boards of directors of both Microsemi and Actel.
The analog and mixed-signal chip maker has entered into a definitive agreement to acquire Actel Corp. for $20.88 per share through a cash tender offer. The total transaction value is approximately $430 million, net of Actel's projected cash balance at closing.
Based in Mountain View, Calif., Actel is a supplier of field programmable gate arrays (FPGAs). Actel competes against Altera, Lattice, SiliconBlue and Xilinx. Now, Microsemi will compete in the tough FPGA fray.
Observers were scratching their heads about the deal. It was a complete surprise. Analog and FPGAs are completely different markets.
"We believe the addition of Actel will deliver compelling synergies to Microsemi," said James J. Peterson, Microsemi's president and chief executive, in a statement.
"Actel will bring the most widely-used mixed-signal, radiation tolerant FPGA products in the aerospace and defense markets today, and the company's products will allow Microsemi to extend its growing system-level capabilities,'' he said. ''As Microsemi continues to move up the value chain in offering its customers system solutions that are better, faster, and more-cost effective than they can build themselves, Actel's highly-integrated solutions will be an integral component in enabling this growth."
Microsemi expects significant synergies from this immediately accretive transaction. Based on current assumptions, Microsemi expects the acquisition to be $0.22 to $0.28 accretive in its first full calendar year ending December 2011.
For the September quarter, net sales for Microsemi are expected to range from $146 to $150 million. As of this date, Microsemi remains comfortable with its previously announced non-GAAP diluted earnings per share guidance for its fourth fiscal quarter 2010 of $0.33 to $0.35.
No approval of the shareholders of Microsemi is required in connection with the proposed transaction. Terms of the agreement were unanimously approved by the boards of directors of both Microsemi and Actel.
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mark.lapedus
10/4/2010 1:46 AM EDT
I am surprised by this. Microsemi is an analog guy. Actel is an FPGA player. Anybody want to comment?
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nicolas.mokhoff
10/4/2010 7:51 AM EDT
It might make sense to have highly reliable FPGAs in one stable with military grade a/m-s parts. Microsemi serves both the medical and defense markets where highly-reliable ICs are paramount.
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patrick.mannion
10/4/2010 10:13 AM EDT
I'm with Nic on this one: Given the evolutionary path of FPGAs and how they've evolved to encompass a widening range of processing applications, combining them with analog/mixed signal, especially for sensing, measurement and control applications, is a smart move!
It also is another round of consolidation that is trending toward 'one size fits all' with regard to hardware and its suppliers.
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Max the Magnificent
10/4/2010 10:28 AM EDT
Mark, when you say "Actel is an FPGA player" you imply "digital" ... but their Fusion and SmartFusion families contain both programmable analog fabric and programmable digital fabric (the SmartFusion devuces also have a hard ARM Cortex-M3 micro-controller core)... I also agree with Nic's comments... but this is still something of a surprise...
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mark.lapedus
10/4/2010 10:34 AM EDT
Sorry. I don't see the ''synergies'' on this one. It's a different business. How many thought Microsemi would enter the FPGA business?
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Max the Magnificent
10/4/2010 11:15 AM EDT
I tend to agree -- looking at Microsemi's product portfolio it seems that they mainly focus on discrete analog components... I'm sort of confused by this one...
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Max the Magnificent
10/4/2010 12:02 PM EDT
OK, "After me the deluge..." .. I'm a bear of little brain ... what does this mean?
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Warren
10/4/2010 12:20 PM EDT
"When it rains it pours" I think. :)
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Max the Magnificent
10/4/2010 12:23 PM EDT
Well, as I'm from England, I can't argue with that (I was 20 years old before I saw the sun :-)
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Brian Fuller2
10/4/2010 12:44 PM EDT
The synergy is a bit in the future, but here's the rationale: Integration, integration, integration. Every analog guy and his mother is trying to move up the integration curve because selling discretes forever is a death spiral. They're increasingly putting together modules of analog parts to save board space, a little power and to add some value.
Now switch over to the FPGA world. Earlier this year, Actel rolled SmartFusion, which fuses an FPGA with an MCU with programmable analog.
There's synergy there on the architectural side.
On the business side, MicroSemi presumably sees FPGAs as way, at least initially, to sell more discretes into more accounts.
The system is the chip.
The biggest issue these two companies will have is cultural integration. This will be a huge challenge.
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dblaza1
10/4/2010 1:05 PM EDT
Bold move by Microsemi and I think the synergies are twofold; first and most obvious is the combined strength in the Mil/Aero market, second and most interesting is the potential for programmable analog with Actel's Smartfusion, this could be a huge market over the next few years and is a clear challenge to companies like Maxim which EE Times wrote about last week who launch a new analog part every day!! All the analog players make big margins from thousands of discrete parts yet shouldn't some of them just be IP blocks? Smart move by Microsemi.
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patrick.mannion
10/4/2010 1:45 PM EDT
In many ways I'm reminded of Cypress's PSoC architecture (programmability + analog/mixed-signal). Microsemi isn't going into the FPGA business. It's going into the 'best platform from which to launch the next generation of integrated solutions' business.
FPGAs have improved dramatically in terms of power consumption over the past four of five years. Together with the migration of late toward integrated RISC and DSP-like processing capability,they're a good hook upon which to hang great analog/M-S expertise.
Sidenote: Maxim showcased some great technology as a result of its $4 billion investment in R&D over the past 9 years. One item that stood out was the 2079 analog front end that could be applied for high-end and low-end ultrasound systems. So, it serves high end and low end systems -- at the same cost per component. That sounds awfully like a resistor.
It's a great part, for sure, and has great specs, but integration around a good programmable platform is necessary for analog vendors. In the case of Microsemi, Actel's lineup is a pretty good base upon which to build added value.
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Brian Fuller2
10/4/2010 1:46 PM EDT
Hmmm... very interesting "take," Richard J. I had lunch with East about a month ago and he intimated they were nowhere close to finding the next CEO.
My feeling was he was trying to find himself in a successor and that's virtually impossible in most succession situations.
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Max the Magnificent
10/4/2010 2:31 PM EDT
I'm free :-)
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Max the Magnificent
10/4/2010 2:32 PM EDT
I mean I could make myself available :-)
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Tsantes
10/4/2010 3:38 PM EDT
Having followed this company since its founding, I think the real question is why it hasn't been acquired sooner. Actel is a sleeper company and better poised today than ever before to move beyond its current position in revenue. (It hasn't moved much beyond its $200M (+/-) revenue range in the last 10 years.) I thought it might have taken place 5 or 6 years ago when larger chip companies were more flush with cash. I think East timed things perfectly, given the state of the (semi) market and valuations. Microsemi will benefit.
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KB3001
10/4/2010 4:33 PM EDT
It must be about higher integration in very demanding military and aerospace applications where low power, low footprint, and reliability are paramount. In monetary terms, it's about a $1.4 Billion company acquiring a $0.4 Billion one, not the biggest take-over of the decade really...
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mark.lapedus
10/4/2010 7:05 PM EDT
Interesting feedback. I am still confused about Actel-Microsemi deal. To me, analog+FPGA=chaos. For example, I can't image Linear buying Altera or Maxim buying Xilinx. Altera and Xilinx are in good shape. (Better than Actel).
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Max the Magnificent
10/4/2010 7:10 PM EDT
I think the difference here is that Actel have carved themselves out a niche with they mixed-signal FPGAs -- having programmable analog fabric (to interface with the real world) and programmable digital fabric (to implement control functions) opens the door to a lot of interesting applications -- but you almost need some external discrete analog components in the mix ... so this does fit together in a way...
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Baolt
10/4/2010 8:56 PM EDT
Why being so skeptical? Analog is the heart of electronic yet having lots of competitors to overtake in order to make good money. Let look from financial side, perhaps admin guys at Microsemi saw future at FPGAs (indeed i also believe there'd be the synergy and bright future) with such acquisition wanted to implement a new business branch. Actel has many products suitable for aero-military where microsemi also makes $ indeed.
We only could get real answer from an high level insider at Microsemi. Otherwise time will show hidden reality.
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EEVblog
10/4/2010 8:58 PM EDT
DAMN. Was just starting to lay out a new design with an Actel part - time to swap vendors...
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Brian Fuller2
10/4/2010 9:02 PM EDT
I expanded on my comments earlier in a blog for EE Times Products. I think this deal makes a lot of sense:
http://eetimes.com/electronics-blogs/other/4209292/Why-the-Microsemi-Actel-deal-works
BTW, to EEVblog, I LOVE that photo!
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Brian Fuller2
10/4/2010 9:04 PM EDT
Let's try that again with the right log-in and photo (arg!):
I expanded on my comments earlier in a blog for EE Times Products. I think this deal makes a lot of sense:
http://eetimes.com/electronics-blogs/other/4209292/Why-the-Microsemi-Actel-deal-works
BTW, to EEVblog, I LOVE that photo!
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EEVblog
10/4/2010 10:02 PM EDT
Thanks, tell your friends:
http://www.eevblog.com
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Max the Magnificent
10/4/2010 10:31 PM EDT
Cheeky! :-)
But as I noted in one of my blogs (http://bit.ly/claPNl) I really enjoy your video blogs -- I look forward to quaffing a few beers with you and Tony Burch if I ever manage to visit "Down Under"
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Bruzzer
10/4/2010 11:30 PM EDT
They did say aerospace, like military maybe; interesting.
mb
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mark.lapedus
10/5/2010 1:12 AM EDT
Here's what happened: In 2008, investment firm Ramius took a 6.6% stake in Actel. (http://www.eetimes.com/electronics-news/4079400/Rumor-mill-Actel-to-see-layoffs). Then, Ramius wanted Actel to divest its flash-based FPGA lines. (http://www.eetimes.com/electronics-news/4080068/Investor-to-Actel-Divest-flash-FPGAs). Actel blinked. Ramius was put on the board-and forced Actel's hand. That, in my opinion, was the beginning of the end. Actel was forced to sell. Enter Microsemi. There is no synergy. Only a match made in .... Do I have it wrong?
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grumpy
10/8/2010 3:56 PM EDT
Very much true, but only part of the story.
Actel has a sad execution history that pegged it at 200M$ or there abouts. The only way out was to be bought and have some real edgy management put in. The Ramius Group was right in many respects.
Go back to EX, a really simple device, due in 4 months from a sales conf announcement in the late 90s - after a very long wait....it staggered into life far too late.
Then there was the really sad chasing of the Holy Grail, Rio, ne SPGA [circa 1996]..an SRAM family.
The upgrade from Fusion to SmartFusion took practically 5 years, some find that a sad joke.
This is mostly about key customer/market match up, and the drive for profit. As far as I can tell the deal is self financing, not bad! What's interesting is the PR damage control already in action, see Dylan McGrath on EET, and trawl through this week's SEC filings from Actel if you want more.
I wouldn't be designing in Actel parts into consumer or commercial designs as of today, maybe in 12 months when the dust has settled.
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docdivakar
10/5/2010 7:58 PM EDT
@mark.lapedus: I too do not see "synergy" in the acquisition. But diversification may be a bigger driving force than synergy and it must have led to the maneuver, your story on board changes and power plays not withstanding.
Besides, there need not be 100% fit in product or technology offerings between the two companies for a merger. Diversification and future technology evolutions may be the driving forces for the merger. Perhaps the big cheese at Microsemi see possibilities in narrowing some Actel product lines and refocus the resources on some new products and/or technology?
Dr. MP Divakar
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Navelpluis
10/6/2010 5:03 AM EDT
Maybe I see ghosts, but I see this has a more impact than anyone may expect. Actel recently has released a few VERY powerful devices, with ARM core integrated in them for the first time. In the cryptology area this is a very interesting FPGA family, due to the fact that they are really secure. For this specific market one can conclude that this must be *horrible* that ACTEL is beeing taken over with the message that 'competing devices' will be scrapped. See www.cryptomuseum.com for our spare time projects, here you see why I can make this opinion with 'some' background ;-)
BTW, transistors and diodes and other 'chicken food' are the most high margin products in any electronics device. Our managers (as stupid as they are) always look at the few big chips on the board, but not to the small stuff around them to let them work. These go into numbers! ;-)
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Donscoggin
10/6/2010 4:24 PM EDT
How can you say discretes are the "highest margin products in a device"? what is your criteria? Look at Vishay's, Murata, Avx etc and compare them to Intel, Linear Tech, Maxim. Your claim is non sensical!
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Navelpluis
10/7/2010 3:54 AM EDT
Donscoggin,
You're right: I should clarify what I mean: Look at the margin per individual part: On caps this can be, say, 50% margin and much more. Compare this with the 3% for the main silicon part. (just an example). Now imagine how many caps and resistors and regulators there are around. Look where the *margin* goes. Vishay and National Semiconductors are doing very well (and for the latter: they deserve it, because I consider this as one as the best companies)
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Donscoggin
10/6/2010 4:21 PM EDT
Their CEO claimed had a college degree and when confronted with this lie continued to lie. The board did nothing but say Whoops He forgot. My guess is that he is running a semiconductor Ponzi scheme. Smells too much like a version of Tyco, Enron, or Bernie Madoff type of growth.
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Dc19868
10/11/2010 6:16 PM EDT
Actel is a useless company with a very Bad
management and technical team Support.
The Uk Team is really Bad.
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