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Street Frowns on Hostile Fight for Atmel

SAN FRANCISCO -- The tech industry's recent track record of unsolicited acquisition offers isn't inspiring.

But Microchip Technology (MCHP - Get Report) and On Semiconductor (ONNN) don't seem fazed.

The two chipmakers raised the stakes in their joint pursuit of Atmel (ATML) Wednesday by announcing a plan to oust Atmel's board and replace it with a crew more amenable to a deal.

Wall Street was decidedly un-enthused by the move into hostile territory.

Shares of Atmel, Microchip and On Semi were all in decline in recent trading Wednesday.

Investors had been expecting Microchip and On Semi to increase their previous bid of $5 a share for Atmel, says one hedge fund manager speaking on condition of anonymity because he was trading some of the stocks involved.

Instead, the pair kept the bid at $5 a share, or $2.3 billion in total, and threw down the gauntlet of a proxy fight to replace Atmel's board members.

Proxy fights are costly and distracting affairs for all parties involved, and success is never assured.

Just last month, Vishay Intertechnology (VSH) saw its plans to take over International Rectifier (IRF) go up in smoke when IRF shareholders voted against a slate of three rival directors for the board nominated by Vishay.

Whether MicroChip and On Semi will fare any better at Atmel's annual shareholder meeting -- expected sometime this spring -- remains to be seen.

The two companies initially announced a plan to takeover Atmel in early October, with Microchip laying claim to Atmel's microcontroller business and On Semi eyeing the radio frequency and automotive chip businesses. The rest of Atmel would be sold to the highest bidder following the merger.
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