Microchip Technology—not Micrel—reported the post-acquisition sales and earnings records. Microchip said Micrel contributed to analog growth and market-share gains in fiscal 2016, and its annual report attributed the year’s sales increase primarily to the acquisition. That is management’s explanation, not a quantified estimate of how much Micrel alone caused.
What happened in the Micrel deal?
Microchip announced a definitive agreement to acquire Micrel on May 7, 2015, offering $14 per Micrel share. The announcement estimated an equity value of about $839 million and an enterprise value of about $744 million after excluding Micrel’s cash and investments. The companies completed the acquisition on August 3, 2015; 98.95% of Micrel shares voted were in favor of the merger.
Microchip described the portfolios as complementary, pointing to linear and power management, LAN, timing and communications. It expected synergies and cross-selling. CEO Steve Sanghi said on May 7, 2015: “We believe that combining Micrel’s business with Microchip’s business will enable significant synergies and cross selling opportunities.” This was the buyer’s expectation at announcement, not a measured report of realized savings.
Under the merger terms described in Microchip’s SEC filing, each Micrel share converted into the right to elect cash consideration valued at $14 or stock consideration, subject to proration.
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What did Micrel bring to Microchip?
Microchip’s current overview of the Micrel portfolio lists mixed-signal, analog and power semiconductors; LAN, timing and communications products; MEMS-based clock oscillators; crystal-less clock generators; Ethernet switches; and physical-layer transceiver ICs. It identifies markets including enterprise, consumer, industrial, mobile, telecom, automotive and computing. This company-provided portfolio summary helps explain the strategic fit, but does not quantify the deal’s financial synergies.
How did Microchip’s results change after the acquisition?
Microchip’s fiscal years end March 31. Its fiscal 2015 results are an important timing check: before the Micrel acquisition closed, Microchip had already reported record net sales and record non-GAAP diluted earnings per share (EPS).
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| Fiscal year | Sales reported | Non-GAAP diluted EPS | Acquisition context |
|---|---|---|---|
| FY2015, ended March 31, 2015 | $2.147 billion GAAP; $2.161 billion non-GAAP | $2.66, a record | Reported before the Micrel acquisition closed |
| FY2016, ended March 31, 2016 | $2.173 billion GAAP; $2.214 billion non-GAAP, both reported as records | $2.68, a record | Microchip said Micrel contributed to analog growth and market-share gains |
| FY2017, ended March 31, 2017 | $3.408 billion GAAP; $3.502 billion non-GAAP, both reported as records | $3.99, a record from continuing operations | Microchip attributed the sales increase primarily to Atmel and also to growth in its historical business |
GAAP and non-GAAP figures are separate measures and should not be conflated. The figures above are from Microchip’s annual results releases; the FY2016 annual report provides the company’s year-over-year sales attribution.
Did Micrel cause Microchip’s record earnings?
The available company statements support a narrower conclusion than “Micrel caused the records.” Microchip reported record GAAP and non-GAAP sales and record non-GAAP diluted EPS in FY2016. In the same results release, it said analog growth and market-share gains reflected both organic efforts and the Micrel acquisition.
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In its FY2016 Form 10-K, Microchip said: “The increase in net sales in fiscal 2016 compared to fiscal 2015 was due primarily to our acquisition of Micrel, offset in part by weaker general economic and semiconductor industry conditions.” This is the company’s attribution of the change in sales, not a counterfactual showing what sales or earnings would have been without Micrel. The cited materials do not isolate a dollar value for Micrel’s contribution to consolidated earnings or quantify total realized synergies.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why FY2017 records need a separate explanation
Microchip reported further records in FY2017, but those results should not be credited to Micrel alone. The company said the increase in FY2017 sales over FY2016 was primarily due to the Atmel acquisition and also to growth in its historical business. The chronology matters: Micrel was acquired in 2015, while the later sales increase reflected another acquisition as well as existing-business growth.
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