Dialog buys Atmel for $4.6bn to attack IoT power management
September 23, 2015
Dialog Semiconductor is to acquire Atmel for $4.6bn to creates a global leader in power management and embedded processing for mobile power, IoT and automotive applications. The combined company will address a fast growing market opportunity of approximately $20bn by 2019.
London-based Dialog aims to complement its leadership position in power management ICs with a portfolio of proprietary and ARM based microcontrollers in addition to ICs for connectivity, touch and security. Dialog also wants to leverage California-based Atmel's sales channels to diversify its customer base.
“Through realised synergies, we expect the combination will deliver an improved operating model and enable new revenue growth opportunities,” said Jalal Bagherli, Dialog chief executive officer. "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."
In 2017, the first full year following closing, the transaction is expected to be accretive to Dialog's underlying earnings. Dialog anticipates achieving projected annual cost savings of $150m within two years.
"This transaction combines two successful companies and will create significant value for Atmel and Dialog shareholders, customers and employees," said Steven Laub, Atmel president and chief executive officer. “Adding Dialog's world-class capabilities in power management with Atmel's keen focus on microcontrollers, connectivity and security will enable Dialog to more effectively target high-growth applications within the mobile, IoT and automotive markets.”
The purchase price implies a total equity value for Atmel of approximately $4.6bn and a total enterprise value of approximately $4.4bn after deduction of Atmel's net cash. The transaction is expected to close in the first quarter of calendar 2016. Dialog intends to fund the transaction with a combination of existing cash, $2.1bn of new debt and the issuance to Atmel shareholders of approximately 49 million shares expected to be listed on the New York Stock Exchange or the Nasdaq Stock Market. Post transaction, it is projected that Atmel shareholders will own approximately 38 per cent of the combined company.
Dialog expects to continue to have a strong cash flow generation profile and have the ability to pay down the transaction debt approximately three years after closing. The transaction has been unanimously approved by the boards of directors of both companies and is subject to regulatory approvals in various jurisdictions and customary closing conditions, as well as the approval of Dialog and Atmel shareholders.
Jalal Bagherli will continue to be the chief executive officer and executive board director of Dialog. Two members of Atmel's existing board will join Dialog's board following closing.
Dialog has received a financing commitment from Morgan Stanley Senior Funding in connection with the acquisition. The financing commitment includes a $2.1bn senior secured credit facility. Morgan Stanley acted as Dialog's exclusive M&A transaction advisor. Davis Polk & Wardwell and Reynolds Porter Chamberlain served as Dialog's legal advisors. Qatalyst Partners acted as exclusive M&A transaction advisor to Atmel. Jones Day served as Atmel's legal advisor.