Citi's Take On Renesas' Purchase Of Intersil

Intersil Corp ISIL announced on September 12 that it has entered into a definitive agreement to be acquired by Renesas.

Citi’s Atif Malik upgraded the rating on Intersil from Sell to Neutral, while raising the price target from $13.50 to $22.50.

The Offer

Malik mentioned that the $3.2 billion offer from Renesas represented a 44 percent premium to Intersil’s stock valuation prior to the first reports of a potential merger beginning to circulate.

Related Link: B. Riley Downgrades Intersil To Neutral

“We viewed Intersil as having low acquisition appeal from US analog peers given high PC exposure and limited EPS accretion room from cost cutting/restructuring,” the analyst stated, while pointing out that “high margins, 13 percent auto exposure, and the fact that restructuring is already done should be attractive to Japanese companies like Renesas.”

Likely To Close

Malik expects low regulatory risk to the deal being approved, since Intersil’s military and aerospace products, representing 10–12 percent of its sales, are standard and not meant for custom analog or power management devices used in commercial and military satellites.

The analyst also does not expect any additional bidders for Intersil, given the 44 percent premium of the existing offer.

“We expect that SMID semiconductors will continue go thru industry consolidation amidst slowing semiconductor industry growth,” Malik added.

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