Are Investors Getting Enough From the Microsemi Acquisition?

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Shares of Microsemi Corp. (NASDAQ: MSCC) saw a handy gain to close out the week after it was announced that the company would be acquired by Microchip Technology Inc. (NASDAQ: MCHP). As the stock is only up a little, it begs the question whether investors are getting enough out of this deal.

According to the deal, Microchip will acquire Microsemi for $68.78 per share in cash. The acquisition price represents a total equity value of about $8.35 billion and a total enterprise value of about $10.15 billion, after accounting for Microsemi’s cash and investments, net of debt.

A look at the charts shows that the 50-day and 200-day moving averages are at $58.51 and $52.75. So this transaction represents a premium of 17.6% and 30.4%, respectively, when compared to those averages.

Microsemi also has seen decent growth over the past 52 weeks, with the stock up about 21%. It is up nearly 25% year to date. Keep in mind that this was a $35 stock as recently as 2016.

Overall it seems like investors are getting a reasonable amount for their shares, considering the growth that the company has seen over the past couple of years.

The board of directors of each company has unanimously approved the acquisition. However, it is still subject to approval by Microsemi stockholders, customary regulatory approvals and other closing conditions. The transaction is expected to close in the second quarter.

Steve Sanghi, board chair and chief executive of Microchip, commented:

We are delighted to welcome Microsemi to become part of the Microchip team and look forward to closing the transaction and working together to realize the benefits of a combined team pursuing a unified strategy. Even as we execute a very successful Microchip 2.0 strategy that is enabling organic revenue growth in the mid to high single digits, Microchip continues to view accretive acquisitions as a key strategy to deliver incremental growth and stockholder value. The Microsemi acquisition is the latest chapter of this strategy and will add further operational and customer scale to Microchip.

Shares of Microsemi were last seen up about 4.5% at $67.18, with a consensus analyst price target of $69.31 and a 52-week range of $46.09 to $67.50.

Microchip traded up about 2.5% at $91.30 a share. The stock has a 52-week range of $71.40 to $99.17 and a consensus price target of $105.40.