NEW YORK (TheStreet) -- Shares of PMC-Sierra (PMCS) were gaining 14.3% to $11.69 on Monday following the announcement that Microsemi (MSCC) offered to acquire the semiconductor devices company for $2.4 billion.
Microsemi said it its offer to acquire PMC-Sierra constitutes a "Superior Proposal" to Skyworks' (SWKS) plan to acquire the company for $2 billion.
Microsemi offered to pay $11.50 a share in cash and stock for PMC-Sierra, which represents a 50% premium over the company's closing price on October 5, the day before Skyworks made its bid for the company. Under the deal PMC-Sierra shareholders will receive $8.75 in cash and 0.0736 of a share of Microsemii stock for each share of PMC-Sierra they hold.
"Based on extensive discussions with PMC over the past 18 months and comprehensive analysis, we believe this transaction offers compelling strategic and financial benefits for the shareholders of both Microsemi and PMC," Microsemi CEO James J. Peterson said in a statement.
About 17.1 million shares of PMC-Sierra were traded by 9:55 a.m. Monday, above the company's average trading volume of about 5.9 million shares a day.
TheStreet Ratings team rates PMC-SIERRA INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate PMC-SIERRA INC (PMCS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PMCS's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.10, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $33.38 million or 17.52% when compared to the same quarter last year. In addition, PMC-SIERRA INC has also vastly surpassed the industry average cash flow growth rate of -78.89%.
- PMC-SIERRA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PMC-SIERRA INC turned its bottom line around by earning $0.00 versus -$0.16 in the prior year. This year, the market expects an increase in earnings to $0.46 from $0.00.
- Compared to its closing price of one year ago, PMCS's share price has jumped by 51.17%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 146.5% when compared to the same quarter one year ago, falling from -$3.48 million to -$8.58 million.
- You can view the full analysis from the report here: PMCS