The transaction, which will close in the first quarter of next year has been officially approved by the board of directors for both companies. The move is part of a corporate strategy to hunt for alternatives to flooded mobile phone markets.
The Wall Street Journal reports that Dialog Chief Executive Jalal Bagherli discussed the merger, saying “the deal will help the company reduce its dependence on a few smartphone makers.”
The emerging deal would lead to a larger, diversified company that would be a high-growth market leader in mobile power and automotive. Bagherli also stated that “by bringing together our technologies, world-class talent and broad distribution channels we will create a new, powerful force in the semiconductor space,”
Nasdaq wrote about the details of the deal, pointing out that the “Atmel shareholders would receive $4.65 in cash and 0.112 of a Dialog American depositary share for each Atmel common share, or the equivalent of $10.42.”
In news related to the merger, Atmel’s shares fell 2.2 percent on Friday to $7.27 during Nasdaq trading. This comprises a 43-percent premium over the company’s closing price of stock trading.
The deal between the two rival businesses will be in the form of cash and stock transactions and the company indicated part of that would be in quantity of 49 million of Dialog American Depository Shares and a combined debt of 2.1 billion dollars.
With the deal, Dialog said it aims to become a more influential player in the growing market for linked devices. The company said it was adding Atmel in part to gain greater scale as it vies for business in a rapidly growing market it estimates to be at $20 billion by 2019.
In a press release on Dialog’s corporate website, the company indicated that the merger will create a fast growing and innovative powerhouse and global leader that would have the capability to oversee both power management and embedded processing solutions successfully.
What attracted Atmel to Dialog was because of its work on successfully addressing developing security concerns that arise when multiple devices are linked. By acquiring the U.S. company’s expertise in micro-controller devices they gain the expertise geared that allow smartphones the capability of controlling other devices.
The acquisition, which is deeply exposed to Samsung and Apple, would expand its client base in network-connected chips used in industrial gear, which is commonly known as the IoT (Internet of Things), as well as automotive markets.
The transaction, expected to close during the first quarter of 2016, would likely see $2.7 billion in sales and yield a significant earnings growth for the German-based company in 2017. The company additionally stated that the merger is predicted to result in annual cost savings of $150 million in two-year’s time.
Sunday’s acquisitions marked the latest of many, according to Reuters, and mergers and acquisitions peaked at $31 billion in 2014. That year marked a huge milestone, and, up until then, there had not been that many since 2011. This year doesn’t indicate any slowdown, either.
Recent deals of this fashion include NXP, who announced the intent last March to purchase U.S. rival Freescale Semiconductor. That acquisition put the combined group values of the two at a reported figure of more than $40 billion. Infineon’s $3 billion buying U.S. rival International Rectifier in 2014 was also a large acquisition of note.
When chip-making companies acquire others that provide the same service, they are looking to gain growing markers in the industrial and automotive sectors — sectors that are currently experiencing demand to create “smarter” products. These products are made smarter by adding Internet connections.
Dialog rose from Daimler-Benz AG in 2000, and the company grew to become an expert in power management for electronic devices and smartphones. They are also currently working on innovative technology that are fast charging. Customers for the company include Apple Inc., Lenovo and Panasonic.
