Are Adesto Shareholders Getting Enough From the Acquisition?

Adesto Technologies Corp. (NASDAQ: IOTS) shares shot up on Thursday after it was announced that Dialog Semiconductor would be acquiring the firm. Are shareholders getting enough out of this acquisition?

Note that this transaction is still subject to certain regulatory approvals and customary closing conditions. The deal is expected to close in the third quarter of this year, and it was unanimously approved by the Adesto board of directors.

Under the terms of the deal, Dialog will acquire Adesto for $12.55 per share in cash, or for approximately $500 million enterprise value. Dialog will be paying for this in cash from its balance sheet.

The $12.55 price offers premiums of 56% and 50%, compared to the 50-day and 200-day moving averages of $8.03 and $8.37, respectively.

The transaction is expected to be earnings accretive for Dialog within the first calendar year following close. Dialog expects annual cost synergies of roughly $20 million within the first calendar year of close across the combined company. Dialog also anticipates considerable additional revenue synergies given the complementary nature of the product portfolios and technology. Adesto expects to report full year 2019 revenue of about $118 million and continued revenue growth is anticipated over the next few years.

Jalal Bagherli, CEO of Dialog, commented:

This acquisition substantially enhances our position in the Industrial IoT market. Adesto’s established strength in connectivity solutions and highly optimized products for building and industrial automation perfectly complements and adds scale to our Industrial IoT portfolio from the recently acquired Creative Chips. Adesto’s deep customer relationships, comprehensive system expertise, and proprietary technology will deliver enhanced value for Dialog customers.

Shares of Adesto traded up about 55% on Thursday, at $12.36 in a 52-week range of $5.40 to $12.38. The consensus price target is $12.00.

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