Microchip Pays £7bn For Microsemi Amid Frenzied Start For Tech Deals

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This year has seen the fastest start to tech mergers and acquisitions since 2000, the height of the dot-com bubble

Arizona-based semiconductor maker Microchip Technology said it would buy Microsemi, the largest US commercial manufacturer of military and aerospace chips, for a deal worth $10 billion (£7.26bn) including debt.

The deal is the latest in a wave of mergers in the semiconductor industry that’s seen Singapore’s Broadcom reveal a record-breaking $142bn bid for US rival Qualcomm, whose chips power most of the flagship smartphones launched at this week’s Mobile World Congress expo.

The deal also accelerates an already frenzied start to dealmaking in the technology sector as a whole this year.

Dealogic says more than $100bn in mergers and acquisitions have been announced so far in 2018, the fastest debut since the peak of the dot-com bubble in 2000.

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Military expansion

California-based Microsemi provides analogue and mixed-signal integrated circuits to the aerospace and defence, communications, data centre and industrial sectors.

Microchip, valued at about $21bn, said the deal would expand its offerings in areas including data centres, communications, aerospace and the military.

At present Microchip sees about 2 percent of its annual sales from aerospace and military sales, with computing and communications accounting for less than 15 percent of full-year sales.

“Joining forces and combining our complementary product portfolios and end market exposure will offer our customers a richer set of solution options to enable innovative and competitive products for the markets they serve,” said Microchip president Ganesh Moorthy in a joint statement by the two firms.

The deal is expected to close in the second quarter of this year.

Data protection concern over Broadcom bid

Broadcom’s hostile takeover of Qualcomm would be the largest tech deal in history, but it has raised concerns in both Europe and the US.

European politicians have said they are uncomfortable with the Singapore company effectively taking control of NXP, a Dutch company that makes chips for German passports, according to a report by the Financial Times. Qualcomm recently agreed to buy NXP for $44bn.

And US lawmakers recently urged the presidential administration to investigate the deal over concerns Broadcom hadn’t first gained the approval of the Committee on Foreign Investment in the US (CFIUS).

Broadcom said earlier this week it wasn’t necessary for CFIUS to review the deal since the company is planning to reincorporate in the US.

Broadcom has also indicated it would be willing to work with European authorities on protecting the data of EU citizens, according to an unnamed source cited by the FT.

Last month the company raised its bid for Qualcomm to $146bn ahead of a crucial Qualcomm shareholder meeting set for 6 March.

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