March 18, 2015
The pace of consolidation in the semiconductor space doesn't appear to be slowing as Microsemi announced Wednesday it will acquire Vitesse in a deal worth $389 million that it says will strengthen its play in communications, particularly in the booming Internet of Things (IoT) market.
Microsemi Corp. has agreed to spend $5.28 per share through a cash tender offer, a 32% premium on the average closing price in the past month for Vitesse Semiconductor Corp. (Nasdaq: VTSS). Microsemi expects the acquisition to be $0.16 to $0.20 per share accretive in its first full fiscal year after the acquisition is completed. The company didn't adjust its guidance for the second quarter, results for which will be announced on April 23. (See Microsemi to Acquire Vitesse.)
As an Ethernet chipmaker, Vitesse has its hands in many different areas, including small cell backhaul, data centers, IoT, SDN, NFV, mobile access and enterprise cloud. Microsemi sees the vendor as complementary to its own efforts with a particular focus on growing in the IoT. (See Vitesse CTO on SDN & NFV, SDN & NFV: Where Are We Going From Here?, Small Cells Exposed! Securing the Mini-RANs and Vitesse Gets Edgy With Carrier Ethernet.)
"Microsemi has been expanding into communications markets and Vitesse brings complementary Ethernet expertise and wide product portfolio," Heavy Reading analyst Simon Stanley concurs. "The acquisition should give the combined company greater traction with telecom and IoT customers."
Read more about the semiconductor industry and its M&A activity in the components section here on Light Reading.
Why this matters
Microsemi and Vitesse are just the latest in what's been a string of consolidation as players, both large and small, look to achieve economies of scale and enter new markets like the IoT and data centers. Those companies making moves of recent include Intel Corp. (Nasdaq: INTC), Avago Technologies Pte. , NXP and M/A-COM Technology Solutions Inc. (See MACOM Remains Laser-Focused on Semiconductors and Chip M&A: What's Next for MACOM?)
— Sarah Thomas, , Editorial Operations Director, Light Reading
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