In a surprising turn of events, chip company MaxLinear announced its successful acquisition of Silicon Motion Technology after more than 14 months of uncertainty. The deal, valued at $3.8 billion, had faced skepticism from investors who believed it would never come to fruition.
Under the terms of the agreement, MaxLinear (MXL) committed to paying $93.54 in cash and 0.388 shares of common stock for each American depositary share of Silicon Motion (SIMO), a Hong Kong-based company. The initial announcement emphasized that the deal would result in “transformational scale” and a “diversified technology portfolio,” expanding the combined company’s market reach while generating profitable cash flow.
One significant obstacle in the transaction’s path was obtaining approval from Chinese regulators, which many had doubts about. At the time of Tuesday’s market close, Silicon Motion shares were trading at $52.20, representing a substantial 50% discount to the agreed deal price.
However, in a surprising development, China’s State Administration for Market Regulation has now approved the deal, albeit with certain conditions attached. This approval has triggered significant movements in the stocks of both MaxLinear and Silicon Motion.
The acquisition marks a milestone for MaxLinear as it solidifies its position as a leader in the semiconductor industry and expands its global presence. It also signifies an exciting opportunity for Silicon Motion to leverage the resources and expertise of MaxLinear for future growth and innovation.
Overall, this unexpected turn of events highlights the dynamic nature of business deals and serves as a reminder that perseverance and strategic planning can lead to successful outcomes, even in the face of initial doubts.
Silicon Motion to be Acquired for $104 per Share
Market Movements
Early on Wednesday, shares of Silicon Motion surged by 78% to reach $92.93, while MaxLinear experienced a 21% decline, resulting in a stock price of $26.72. This significant development followed the announcement of Silicon Motion’s acquisition.
Approval in China Signals Promising Outlook
According to a research note from Wedbush analyst Matt Bryson, the approval received from China signifies a positive step forward for the acquisition. Bryson stated, “After extended speculation regarding the likelihood of this transaction being finalized due to concerns surrounding SAMR’s approval, we now believe that the deal is set to be completed.”
Conditions for the Acquisition
Wells Fargo analyst Gary Mobley revealed that the approval notice outlines specific conditions for the deal. One condition states that Silicon Motion must continue supplying NAND flash memory controllers to China without introducing any malware. A second condition mandates that Silicon Motion retain their field application engineers in China to provide customer support for NAND flash controllers.
Outlook and Further Information
Both Silicon Motion and MaxLinear were unavailable for immediate comment on this development. However, MaxLinear is expected to report their earnings following the completion of trading on Wednesday.
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