Dialog agrees to buy Atmel for $4.6B

Dialog Semiconductor announced a cash-and-stock deal to buy Atmel for about $4.6 billion.

The acquisition will result in a new company that combines power management and embedded processing solutions, supporting mobile power, automotive and Internet of Things (IoT) customers, and addressing a growing market worth approximately $20 billion by 2019.

Dialog, a U.K.-based company, develops chips used in smartphones from Apple and Samsung, while U.S.-based Atmel manufactures microcontrollers used in consumer and business hardware.

Dialog will complement its power management ICs with a portfolio of proprietary and ARM-based microcontrollers in addition to high performance ICs for connectivity, touch and security. It will also leverage Atmel's established sales channels to diversify its customer base.

"Our new, enlarged company will be a diversified, high-growth market leader in mobile power, IoT and automotive," said Dialog CEO Jalal Bagherli. "We will create a strong platform for innovation and growth in the large and attractive market segments we serve."

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 $150 million within two years.

Under the terms of the agreement, Atmel shareholders will receive $4.65 in cash and 0.112 of a Dialog American Depository Share (ADS) for each Atmel common share held at close of the transaction resulting in the economic equivalent of $10.42 per Atmel share based on Dialog's closing stock price as of 18 September 2015.

The purchase price implies a total equity value for Atmel of approximately $4.6 billion and a total enterprise value of approximately $4.4 billion after deduction of Atmel's net cash.

The transaction is expected to close in the first quarter of 2016. Dialog intends to fund the transaction with a combination of existing cash, $2.1 billion of new debt and the issuance to Atmel shareholders of approximately 49 million ADSs expected to be listed on the New York Stock Exchange or the NASDAQ Stock Market.

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