Dialog Semiconductor (XTRA: DLG) and Atmel Corporation (NASDAQ: ATML) announced today that Dialog has agreed to acquire Atmel in a cash and stock transaction for total consideration of approximately $4.6 billion. The acquisition creates a global leader in both Power Management (2) and Embedded Processing solutions. The transaction results in a fast growing and innovative powerhouse, supporting Mobile Power, IoT and Automotive customers. The combined company will address an attractive, fast growing market opportunity of approximately $20 billion by 2019.
Dialog will complement its leadership position in Power Management ICs with a leading portfolio of proprietary and ARM® based Microcontrollers in addition to high performance ICs for Connectivity, Touch and Security. Dialog will also leverage Atmel's established sales channels to significantly diversify its customer base. Through realized synergies, we expect the combination will deliver an improved operating model and enable new revenue growth opportunities.
"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," said Jalal Bagherli, Dialog Chief Executive Officer.
"This transaction combines two successful companies and will create significant value for Atmel and Dialog shareholders, customers and employees. 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," said Steven Laub, Atmel President and Chief Executive Officer.
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")(3) 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 calendar 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. Post transaction, it is projected that Atmel shareholders will own approximately 38 percent of the combined company. The transaction would result in a capital structure with leverage of approximately 3x Net Debt/Estimated LTM EBITDA at closing. Dialog expects to continue to have a strong cash flow generation profile and have the ability to substantially 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.
The transaction is not subject to a financing condition. Dialog has received a financing commitment from Morgan Stanley Senior Funding, Inc. in connection with the acquisition. The financing commitment includes a $2.1 billion senior secured credit facility.
Morgan Stanley acted as Dialog's exclusive M&A transaction advisor. Davis Polk & Wardwell LLP and Reynolds Porter Chamberlain LLP (RPC) 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.
(1) Last Twelve Months (LTM).
(2) Power Management segment defined as power management solutions for mobile platforms including smartphones, tablets, portable PCs and wearable-type devices.
(3) One Dialog ADS equal to one Dialog share of common stock.
