OREANDA-NEWS. PMC-Sierra, Inc. (PMC®) (NASDAQ: PMCS), the semiconductor and software solutions innovator transforming networks that connect, move and store big data, today announced that PMC’s board of directors unanimously determined, after receiving the advice of its financial advisors and outside legal counsel, that the latest proposal received from Microsemi Corporation (NASDAQ: MSCC) to acquire all of the outstanding shares of PMC common stock is not superior to PMC’s existing agreement with Skyworks Solutions, Inc. (NASDAQ: SWKS) for the reasons set forth below.

  • The Board believes that the mixed stock/cash consideration proposed by Microsemi does not provide superior value compared to the all cash $11.60 transaction with Skyworks.
  • While Microsemi’s proposal is nominally higher than Skyworks’ proposal based on prices as of October 30, 2015, the Board believes that Skyworks’ all cash proposal provides more value certainty to shareholders than the stock and cash consideration provided in the Microsemi proposal.
  • In particular, the Board noted the following about the stock component of Microsemi’s offer, which represents approximately 23.5% of the overall consideration toPMC-Sierra shareholders.
    • Capital markets broadly, and semiconductor stocks specifically, have been highly volatile recently due to concerns about recent earnings results and outlook, slowing global economic growth, rising interest rates, and geopolitical uncertainties. This volatility adds a high level of uncertainty to the stock component of Microsemi’s offer.
    • Microsemi is currently trading near its five-year high, with a 16% appreciation just since the beginning of September. When using a sixty- or ninety-trading-day- average of Microsemi closing stock prices, the value of the Microsemi offer is essentially the same as Skyworks’ proposal ($11.61 vs $11.60). An 8% or greater decline in the Microsemi stock price from current levels, to a level where the stock was trading as recently as the beginning of October, would result in a nominal value for the Microsemi offer that is below the $11.60 in cash offered by Skyworks.
    • After giving effect to the debt incurred in a potential acquisition of PMC, Microsemi will be one of the most highly leveraged public semiconductor companies, with pro forma CY2015 Total Debt to EBITDA (based on consensus street estimates) of 5.7x, and over 4.7x after giving immediate credit for synergies. The PMC Board believes that this high leverage adds financial risk to the execution risk associated with integrating the companies, and creates additional volatility and risk to the Microsemi stock price.
  • The PMC Board has taken into account the relatively modest timing difference between the two proposals.

On October 30, 2015, PMC announced that PMC’s board of directors determined, after consultation with its financial advisors and outside legal counsel, that the Microsemi proposal would reasonably be expected to lead to a Superior Proposal, however, PMC’s board of directors did not believe that Microsemi’s proposal provided superior value to PMC shareholders, and at the direction of PMC’s board of directors, PMC’s financial advisors requested Microsemi to improve its price and to provide its best and final offer. Microsemi, however, has not been willing to offer any further increase in the price offered, and for the reasons set forth above, at this time PMC’s board is unable to conclude that Microsemi’s proposal constitutes a superior proposal as required under PMC’s existing Skyworks merger agreement.

Under the terms of Microsemi’s proposal, PMC stockholders would receive $9.04 in cash and 0.0771 of a share of Microsemi common stock for each share of PMC common stock held at the close of the transaction. Based on the closing stock price of Microsemi common stock on Oct. 30, 2015, the Microsemi proposal was valued at $11.82 per share of PMC common stock.

PMC had previously announced (on October 30, 2015) that it had entered into an amended and restated merger agreement with Skyworks Solutions, Inc. (NASDAQ: SWKS) pursuant to which Skyworks would acquire all of the outstanding shares of PMC common stock for $11.60 per share in an all-cash transaction.

PMC’s board of directors continues to recommend the amended and restated merger agreement with Skyworks to its stockholders. PMC’s board of directors is not modifying or withdrawing its recommendation with respect to the amended and restated merger agreement and the merger with Skyworks, or proposing to do so, and is not making any recommendation with respect to the Microsemi proposal.

Qatalyst Partners LP and Needham & Company, LLC are acting as financial advisors to PMC and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor.

About PMC

PMC (NASDAQ: PMCS) is the semiconductor and software solutions innovator transforming networks that connect, move and store big data. Building on a track record of technology leadership, PMC is driving innovation across storage, optical and mobile networks. PMC’s highly integrated solutions increase performance and enable next-generation services to accelerate the network transformation.