Are Atmel Shareholders Getting Enough in the Buyout?

Chinese companies are swooping in and acquiring U.S. chip companies left and right. This trend started with rumors of a potential takeover bid of Micron, and it has even spread to slightly smaller companies like Atmel Corp. (NASDAQ: ATML). Over the weekend, Dialogue Semiconductor announced that it had entered into an agreement to acquire Atmel to the tune of roughly $4.6 billion. The question is whether Atmel shareholders are getting enough in the buyout.

This newly combined company will address the fast-growing chip market with an expected opportunity of about $20 billion by 2019. Dialog anticipates achieving projected annual cost savings of $150 million within two years. This transaction is expected to close in the calendar first quarter of 2016.

Under the terms of the agreement, Atmel shareholders will receive $4.65 in cash and 0.112 of a Dialog American depositary share (ADS) for each Atmel common share held at close of the transaction, resulting in the economic equivalent of $10.42 per Atmel share based on Dialog’s closing stock price of September 18.

Jalal Bagherli, CEO of Dialog, said:

The rationale for the transaction we are proposing today is clear — and the potential this combination holds is exciting. By bringing together our technologies, world-class talent and broad distribution channels we will create a new, powerful force in the semiconductor space. Our new, enlarged company will be a diversified, high-growth market leader in Mobile Power, IoT and Automotive. We firmly believe that by combining Power Management, Microcontrollers, Connectivity and Security technologies, we will create a strong platform for innovation and growth in the large and attractive market segments we serve. This is an important and proud milestone in the evolution of our Dialog story.

So what about the shareholders? Analysts peg the stock’s consensus price target at $9.21, just short of what the stock is trading for currently. The highest price target from analysts is $12.

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Here are some of the most recent ratings from analysts:

• Topeka Capital Markets downgraded the stock to a Hold rating from Buy and lowered the price target to $9 from $10.
• Wedbush downgraded to a Neutral rating from Outperform.
• FBR downgraded to a Market Perform from Outperform and lowered the price target to $10.50 from $11.00.

Shares of Atmel closed Friday down 2.2%, at $7.27 in its 52-week trading range of $5.84 to $10.50. In early trading indications Monday, shares were up nearly 19% at $8.64.

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