Skyworks to Acquire PMC-Sierra For $2 Billion in Cash

Skyworks Solutions, Inc., in high performance analog semiconductors connecting people, places and things, and PMC-Sierra, Inc. (PMC), a semiconductor and software solutions in storage, optical and mobile networks, announced a definitive agreement under which Skyworks will acquire PMC for $10.50 per share in an all-cash transaction valued at approximately $2 billion.

This acquisition solidifies Skyworks’ position as a diversified analog, RF and mixed signal semiconductor company by expanding its product portfolio, customer base and end market applications.

Upon completion of the acquisition, Skyworks expects annual revenues of more than $4 billion with gross margin in the 55% range and operating margin exceeding 40%.

“With our acquisition of PMC, Skyworks will be uniquely positioned to capitalize on the explosive demand for high performance solutions that seamlessly connect, transport and store big data,” said David J. Aldrich, chairman and CEO, Skyworks. “Specifically, we plan to leverage PMC’s innovative storage systems, flash controllers, optical switches and network infrastructure solutions to expand our engagements with some of the world’s leading OEMs and ODMs as well as emerging hyperscale data center customers. At a higher level, this complementary yet highly synergistic acquisition is consistent with our stated strategy of diversifying into adjacent vertical markets while leveraging our system-level expertise and global scale. PMC enables us to substantially expand our serviceable market within some of the fastest growing segments in technology including cloud storage and optical networking. Financially, we expect this transaction to create further economic value for our shareholders upon closing, with immediate margin expansion and accretion. After we implement $75 million of synergies, we expect at least $0.75 of incremental non-GAAP diluted earnings per share on an annual basis.”

“The PMC team is excited to join forces with Skyworks to realize our vision of transforming the broader communications landscape through unparalleled product breadth and operational scale,” said Greg Lang, president and CEO, PMC. “Given Skyworks’ deep global sales channels and leadership applications support, underpinned by a world class supply chain, we could not have found a better partner. Together, we plan to develop a wider range of solutions for our customers, target new growth vectors and enable some of the most exciting networking and storage platforms in the world, while delivering immediate value for our shareholders.”

Under the terms of the agreement, PMC’s stockholders will receive $10.50 in cash for each share of PMC common stock held at closing. This price represents a 37% premium to the close of PMC’s stock as of October 5, 2015.

Skyworks intends to fund the acquisition with cash on hand from the combined companies and with new, fully-committed debt financing. The closing of the transaction is not subject to financing conditions.

The boards of directors of each company have approved the transaction, which is expected to close in the first half of calendar 2016, subject to PMC shareholder approval, receipt of regulatory approvals and other customary closing conditions.

Excluding any non-recurring acquisition-related charges and amortization of acquired intangibles, Skyworks expects the acquisition to be immediately accretive to non-GAAP earnings post-closing and will finalize estimates of the transaction’s financial impact as well as the accounting for the transaction upon deal close.

Skyworks Business Update
Based on preliminary results, Skyworks expects to deliver approximately $880 million in revenue and $1.52 of non-GAAP diluted earnings per share for the fourth quarter of fiscal 2015.

“Skyworks’ sustained outperformance is being driven by the growing adoption of our integrated mobile systems and new opportunities across the Internet of Things,” said Donald W. Palette, EVP and CFO, Skyworks.