Chipmaker MaxLinear on Thursday announced plans to buy industry peer Silicon Motion Technology in a cash-and-stock deal worth $3.8 billion. MXL stock fell on the news but SIMO stock rocketed.
Carlsbad, Calif.-based MaxLinear said the deal will diversify its technology portfolio and vastly expand its total addressable market. MaxLinear makes radio frequency, analog and mixed-signal integrated circuits for broadband, connectivity, and infrastructure markets. Taiwan-based Silicon Motion is a leader in Nand flash controllers for solid-state storage devices.
MaxLinear said the acquisition will roughly double its addressable market opportunity to $15 billion and will create a top-10 fabless semiconductor supplier.
MaxLinear will pay $93.54 in cash and 0.388 shares of MaxLinear common stock per American depositary share of Silicon Motion. The deal is worth $114.34 per ADS, based on the closing price Wednesday of MXL stock.
The transaction represents a 48% premium to the "undisturbed market value" of SIMO stock on April 22. That's before news reports circulated that Silicon Motion was an acquisition target.
MXL Stock Drops, SIMO Stock Jumps
On the stock market today, MXL stock dropped 16.7% to 44.68. SIMO stock jumped 17.2% to 95.16.
"The enhanced scale of the combined organization creates a new significant $2 billion-plus (annual revenue) player in the semiconductor industry with compelling positions across a diversified set of end markets," MaxLinear Chief Executive Kishore Seendripu said in a news release.
MaxLinear shareholders will own 86% of the combined company and Silicon Motion stockholders will own 14%. The two companies expect the transaction to close by the first half of 2023.
Wedbush Securities analyst Matt Bryson said he wouldn't rule out competing bids for Silicon Motion.
"Depending on the exact terms of the transaction (e.g., termination fees), we do see some potential for a competitive bid," Bryson said in a note to clients. Potential rival bidders could include Broadcom, Marvell Technology, Microchip Technology and MediaTek, he said.
Susquehanna Financial Group analyst Christopher Rolland said he believes the deal was financially motivated and makes less sense strategically. MaxLinear is looking to obtain greater scale so it can have more influence on its supply chain, he said in a note to clients.
IBD Exclusive Ratings For MXL Stock, SIMO Stock
Early Thursday, SIMO stock broke out of an 18-week consolidation pattern at a buy point of 96.99, according to IBD MarketSmith charts. SIMO stock is on the IBD 50 list of top-performing growth stocks.
SIMO stock ranks second out of 10 stocks in IBD's Computer-Data Storage industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 95 out of 99. The Composite Rating scores a stock's key growth metrics against all other stocks regardless of industry group.
MXL stock is ranked No. 8 out of 30 stocks in IBD's Electronics-Semiconductor Fabless industry group. It has a Composite Rating of 84.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
