Microchip Technology agreed to buy Standard Microsystems Corporation (SMSC) for $37 per share in cash in May 2012, valuing SMSC’s equity at about $939 million. The deal closed on August 2, 2012, and added SMSC’s connectivity products to Microchip’s embedded-control business.
How much did Microchip pay for SMSC?
Microchip and SMSC announced the agreement on May 2, 2012, after signing a definitive agreement on May 1. Microchip offered $37.00 in cash for each SMSC share. The companies put the total equity value at approximately $939 million; after accounting for about $173 million of SMSC cash and investments, the stated enterprise value was approximately $766 million.
Those are distinct measures: equity value reflects the value paid for shareholders’ shares, while enterprise value adjusts for the target’s cash and investments. SMSC reported $412 million in fiscal-year 2012 net sales, a 54.4% non-GAAP gross margin and non-GAAP operating profit equal to 12% of sales in the announcement. These are the company’s reported figures, not a forecast of the acquisition’s future results.
Why did Microchip want SMSC?
Microchip presented SMSC’s smart mixed-signal connectivity products as a complement to its embedded-control business. The aim was to broaden the range of solutions Microchip could offer in embedded applications, rather than to acquire a company in an unrelated field.
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Microchip CEO Steve Sanghi said the acquisition would extend the company’s offerings in automotive, industrial, computing, consumer and wireless-audio markets. In practical terms, SMSC brought connectivity and sensing capabilities that could sit alongside Microchip’s existing control products.
What products and markets did SMSC bring?
| Product area | What SMSC contributed | Markets named in the announcement |
|---|---|---|
| Connectivity | USB and MOST automotive networking | Computing and automotive |
| Wireless audio | Kleer wireless-audio technology and the JukeBlox platform | Consumer and wireless audio |
| Embedded systems | Embedded system control and thermal management | Industrial and computing |
| Sensing | RightTouch capacitive sensing | Consumer and embedded applications |
The product categories help explain the strategic fit: Microchip’s stated rationale was to combine embedded control with connectivity and other mixed-signal capabilities across several end markets. The announcement described the intended expansion; it does not by itself establish how any specific product was later integrated or performed.
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When did the acquisition close?
The acquisition closed on August 2, 2012. SMSC’s Nasdaq trading ceased, and SMSC became a wholly owned Microchip subsidiary.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How was the closing financed?
Microchip’s 2012 Form 10-Q reported approximately $258.8 million of existing cash and investments and approximately $600.0 million of borrowings used to finance the closing. These financing figures describe the resources reported for the transaction; they are not the same as the deal’s equity value or enterprise value.
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