Acquisition of Mindspeed by MACOM Sends Shares Soaring

By Paul Ausick Updated Apr 27, 3:11PM EDT · Published Nov 6, 10:26AM EST

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M/A-COM Technology Solutions Holdings Inc. (NASDAQ: MTSI) has signed a definitive agreement to acquire semiconductor maker Mindspeed Technologies Inc. (NASDAQ: MSPD) for $5.05 a share, or a total of around $272 million, or about $246 million net of Mindspeed’s cash. MACOM will commence a tender offer for all outstanding shares of Mindspeed and expects the transaction to close by the end of this year.

Mindspeed’s shares closed at just under $3.00 on Tuesday night and have traded as high as $10 a share as recently as 2010. The stock price peaked at around $50 a share in 2004. Mindspeed completed a one-for-five reverse stock split in 2008, reducing the number of shares outstanding at the time to around 24 million. There are approximately 43.4 million shares of Mindspeed stock outstanding now.

MACOM came public in March of 2012, and its stock price peaked at around $22 a share shortly thereafter. The company has about 46 million shares outstanding, and its market cap is around $765 million.

MACOM expects the acquisition immediately to add $0.15 to $0.20 to earnings per share (EPS) in fiscal 2014, as well as $0.25 to $0.30 to EPS in fiscal year 2015. The company expects to reduce costs in corporate overhead, R&D overhead and SG&A, and to sell off underperforming businesses. MACOM also said Mindspeed is in advanced discussions with a potential strategic buyer for its wireless business, which it plans to sell before the MACOM transaction closes. If the business cannot be sold, “it will be restructured and wound down while continuing to support its customers.”

MACOM’s CEO said:

This acquisition will position MACOM as a leading global provider of 100G optical solutions which underscores our growth strategy in commercial communications markets. Our interest in Mindspeed is the company’s high-growth, high-margin HPA [high performance analog] business as well as its cash-generating VoIP business.

Shares of Mindspeed were up nearly 69% in early trading, at $5.02 in a 52-week range of $2.85 to $5.27. MACOM shares were down about 1%, at $16.54 in a 52-week range of $10.01 to $18.25.

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About the Author Paul Ausick →

Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.