Microsemi Corporation (Nasdaq:MSCC) today announced that it will acquire PowerDsine Ltd. (Nasdaq: PDSN) for $245 million, reflecting a premium of 18.5% on the company’s market cap at yesterday’s close on Wall Street.
Microsemi has a market cap of $1.5 billion and over $400 million in annual sales. The company designs and manufactures high-performance analog integrated circuits for communications systems, PCs and aviation and military products.
Under the acquisition agreement, PowerDsine shareholders will receive per share $8.25 in cash and 0.1498 Microsemi shares. On the basis of Microsemi’s closing price yesterday, the deal represents a price of $11 per PowerDsine share.
Microsemi plans to continue investing in PowerDsine’s two core businesses: midspan and integrated product lines. PowerDsine designs, develops and supplies processors, modules and systems for power-over-Ethernet in local area networks (LANs). The company sells its midspan products worldwide though leading distributors.
PowerDsine's share price rose 11.5% in response to the news of the acquisition at the opening of trading on Wall Street today.
There have been rumors in recent months about a potential sale of PowerDsine. Potential buyers mentioned included Marvell Technology Group (Nasdaq: MRVL), Texas Instruments Inc. (NYSE:TXN), Maxim Integrated Products Inc. (Nasdaq:MXIM), and Freescale Semiconductor Inc. (NYSE:FSL). The name of the actual buyer, Microsemi, was never mentioned.
These rumors and the improvement in PowerDsine’s business results boosted the company’s share 34% in the past three months.
PowerDsine CEO Igal Rotem said, “We had a number of offers. We picked Microsemi because it’s a mid-sized company, which will enable us to preserve our business and corporate identity. We felt that the link-up was suitable because the companies are similar in their organizations.”
PowerDsine will become a division within Microsemi. Rotem stresses that Mircosemi’s goal is to expand PowerDsine and invest in the company’s two areas of activity. “Microsemi is known in three main markets: aviation-military, medical devices, and analog,” he says. “PowerDsine comes under analog, which is entirely aimed at communications and computers. Microsemi will enter new fields through the acquisition and increase its customers.”
PowerDsine had a number of offers, and Rotem says Microsemi’s offer was not necessarily the highest. “We took a long-term view, aiming at collaboration for many years ahead,” he said. “As far as the investors are concerned, the acquisition means that they are making their money back. The company is the entity that will have to live with the buyer afterwards. We felt that we wouldn’t be swallowed up by Microsemi and disappear.”
The investors making money that Rotem was referring to include General Atlantic, PowerDsine’s largest shareholder, with a 23.7% stake. General Atlantic invested in the company in 2004 when its share was worth $11.10, more than the price tag in the present deal. General Atlantic’s stake under the deal is worth $52.6 million.
Rotem says, “It should be taken into account that the shareholders agreed to the deal because they believe, justifiably, that the closing price will be higher, and there are excellent reasons for believing so.”
Published by Globes [online], Israel business news - www.globes.co.il - on October 24, 2006
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