Microchip Completes Supertex Acquisition - Analyst Blog

Leading semiconductor manufacturer Microchip Technology Inc. MCHP recently completed the acquisition of integrated circuits (IC) manufacturer Supertex Inc. SUPX for a cash consideration of $33 per share. The transaction was consummated after the mandatory approval of the majority of Supertex shareholders.

This strategic purchase will enable Microchip to expand in the Medical, Industrial and Lighting verticals. Microchip is also expected to leverage Supertex' strong domain knowledge in high voltage analog and mixed signal technologies to achieve significant operating synergies and create cross-selling opportunities. Consequently, the acquisition is anticipated to be accretive to Microchip's non-GAAP earnings per share in the very first quarter of its operation post-merger.

In the third quarter of fiscal 2013 (results declared on Jan 21, 2014), Supertex had recorded healthy year-over-year increases in net sales, net income and net margin. Net sales increased 21% year over year to $17.4 million, while GAAP earnings almost doubled to 23 cents per share from 12 cents per share in the year-ago period.

Earnings also comfortably beat the Zacks Consensus Estimate by 5 cents. In addition, net margin increased 10% for the first nine months of fiscal 2013 from the comparable year-ago period.

On the other hand, Microchip's broad customer profile, extensive supply chain and operational excellence offer tailwinds for Supertex to achieve organic growth. Moving forward, Supertex customers will continue to utilize the erstwhile sales and support channels to book orders and get deliveries. The transaction is thus a win-win move for both the companies.

Microchip develops and manufacturers microcontrollers, memory and analog and interface products for embedded-control systems, which are small, low-power computers designed to perform specific tasks. Striking features such as quality, performance, reliability, ease of use, pricing and diversity of products have been its forte, making it one of the well-positioned companies in the semiconductor universe.

Microchip presently has a Zacks Rank #3 (Hold). Players in the industry that are worth considering include ON Semiconductor Corp. ONNN and MaxLinear, Inc. MXL, both carrying a Zacks Rank #2 (Buy).