Terms of the deal call for Aliso Viejo, Calif.-based Microsemi to pay $5.28 in cash for each Vitesse share, a premium of 35.7% to the target's Tuesday close. The agreement gives Vitesse until April 7 to solicit superior proposals and gives Microsemi the right to match any superior proposal or receive a termination fee under certain circumstances.
Camarillo, Calif.-based Vitesse designs semiconductors, software and integrated systems for carrier, enterprise and "Internet of Things" networks. Microsemi, a maker of chips for the communications, defense, aerospace and industrial markets, in a statement said that the purchase "is further evidence" of its commitment to grow its communications business.
"Vitesse's highly complementary technology suite will expand our product offering and accelerate growth with differentiated technology in emerging markets, while benefiting from the increased scale, consolidated infrastructure and cost savings of the combined entity," Microsemi chairman and CEO James J. Peterson said in a statement.
Microsemi said it expects after it closes, the deal will contribute 16 cents to 20 cents a share in earnings during its first fiscal year.
Vitesse has been a target of activist pressure, with Raging Capital Management pushing for change since at least June 2012. That fund managed to get two nominees elected to Vitesse's board in 2013, and soon after another fund, Columbia Pacific Advisors, called on the company to explore a sale or breakup.
Columbia said at the time it had been approached by a "well-capitalized North American-headquartered semiconductor designer regarding their interest in acquiring" Vitesse for "potentially very substantial premium."
Vitesse CEO Chris Gardner said combining with Microsemi "will create a powerful combination."
Bank of America Merrill Lynch is providing customary committed debt financing for the acquisition. BofA Merrill Lynch and RBC Capital Markets are financial advisers, and O'Melveny & Myers is serving as legal counsel to Microsemi.
Deutsche Bank and Needham are acting as financial advisers and Stubbs Alderton & Markiles is serving as legal adviser to Vitesse.
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