NEW YORK (TheStreet) -- Shares of Spansion (CODE) were gaining 10.9% to $25.33 after-hours Monday after announcing it will merge with Cypress Semiconductor (CY) - Get Cypress Semiconductor Corporation Report in a $4 billion stock deal.
Shares of Cypress were gaining 4.2% to $10.87 in after-hours trading following the announcement.
Under the agreement Spansion shareholders will receive 2.457 shares of Cypress for each share of Spansion they hold. Shareholders of each company will own about 50% of the merged company, which will take the Cypress Semiconductor name.
The combined company will generate more than $2 billion in revenue annually, and will be the number one manufacturer of NOR Flash and SRAM memory, according to Cypress. The combined company plans to pay a quarterly dividend of 11 cents a share to shareholders.
Cypress and Spansion expect the deal to close sometime in the first half of 2015.
TheStreet Ratings team rates SPANSION INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SPANSION INC (CODE) 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 solid stock price performance, increase in net income and robust revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 70.6% when compared to the same quarter one year prior, rising from -$36.90 million to -$10.85 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.6%. Since the same quarter one year prior, revenues rose by 15.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SPANSION INC reported significant earnings per share improvement in the most recent quarter compared to 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, SPANSION INC swung to a loss, reporting -$1.34 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus -$1.34).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SPANSION INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $34.68 million or 30.37% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: CODE Ratings Report