Analyzing 5 More Semiconductor Merger Candidates After Altera

The semiconductor arena has been abuzz with mergers and acquisitions, whether the deals come about or fall through. There have been a few big winners in this space so far, with a couple big acquisitions solidified in just the past week alone, but this leaves more room for mergers to happen in the future. Some of the companies reviewed here are not necessarily acquisition targets but potentially acquirers themselves.

Previously 24/7 Wall St. noted that it was always concerned about the reality of a merger between Intel Corp. (NASDAQ: INTC) and Altera Corp. (NASDAQ: ALTR). The reason is regulatory oversight. Intel is considered the de facto king of processors in personal computers (PCs), but so far efforts to expand elsewhere have not been blocked. That could be good news for the industry.

The concern is that, as mentioned, the Intel-Altera deal will create a ripple around the chip space. In some ways, it is fairly easy to argue that the acquisition by Intel would create a World War I reaction: if Intel mobilizes, then its rivals have to mobilize. This is why we considered the rumors about ARM Holdings PLC (NASDAQ: ARMH) and Apple Inc. (NASDAQ: AAPL) as driven by the possibility of an Altera-Intel deal. Although it would appear that Intel is reacting as, Avago Technologies Ltd. (NASDAQ: AVGO) and Broadcom Corp. (NASDAQ: BRCM) struck first with their merger.

The fact that Altera is being acquired by Intel means that there could be another buyer that wants Xilinx Inc. (NASDAQ: XLNX). There was a slight market cap differential here: Xilinx is worth $12.5 billion and Altera is currently worth just under $16 billion. Or there is another tact here, perhaps that Xilinx will look at acquiring a company. Xilinx shares were up 2% at $40.37 on Monday.

Skyworks Solutions Inc. (NASDAQ: SWKS) may be on the lookout to do a deal that would help diversify the company away from its dependence on the mobile market. On May 22, the company was started as Neutral with a price target of $108 (versus a $103.89 close) at Goldman Sachs. Skyworks was also one of the best performing stocks at the beginning of the year. Skyworks shares were up 1% at $110.40 on Monday.

Marvell Technology Group Ltd. (NASDAQ: MRVL) has been the subject of merger rumors in the past, but it has been a long time since anyone has heard any of that. Also Citigroup recently started coverage with a Sell rating for Marvell, which could get in the way with any merger aspirations. Marvell shares were up over 2% at $14.37 on Monday.

Applied Materials (NASDAQ: AMAT) and Tokyo Electron announced in late April that they have agreed to terminate their merger. In accordance with the agreement, no termination fees will be payable by either party. The merger was originally announced in September 2013.

Basically, this decision came after the U.S. Department of Justice advised the parties that the coordinated remedy proposal submitted to all regulators would not be sufficient to replace the competition lost from the merger. Based on the Justice Department’s position, Applied Materials and Tokyo Electron determined that there is no realistic prospect for the completion of the merger.

At the same time as the announcement of the merger termination, Applied Materials announced a $3 billion share repurchase program that will take place over the next three years. It would only make sense that if regulators thought Tokyo Electron would create an anti-competitive chip equipment environment, then perhaps Applied Materials is seeking a smaller acquisition. Applied Materials shares were up almost 1% at $20.30 on Monday.

ARM Holdings was the only one of the would-be chip merger designees that was down on the day. Its American depositary shares were down by 0.5% at $53.00, perhaps because its valuation is always considered to be so high.

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