NEW YORK (TheStreet) -- Shares of Supertex (SUPX) exploded on Monday after Microchip Technology (MCHP) announced it would purchase the semiconductor company for $394 million in cash, or $33 a share. The offer represents a 35% premium to Friday's close of $24.38.
By early afternoon, Supertex had soared 35.3% to $32.99, while Microchip was up 0.59% to $44.70. Supertex trading volume of 1.5 million was 34 times its three-month average daily volume.
The acquisition is expected to be accretive to Microchip's non-GAAP net income in the first full quarter after the transaction has been completed. The acquisition is expected to close in the second quarter of 2014, subject to shareholder and regulatory approval.
"Supertex's deep domain knowledge in high voltage analog and mixed signal technologies, and strong position in the Medical, Industrial and Lighting markets, complement many of Microchip initiatives in these areas. We believe that combining Supertex's business with Microchip's Analog business will enable significant synergies and cross-selling opportunities," said Microchip CEO Steve Sanghi in a statement.
Microchip Technology specializes in microcontrollers and on-board Flash, or reprogrammable, memory technology.
TheStreet Ratings team rates SUPERTEX INC as a Buy with a ratings score of B. The team has this to say about their recommendation:
"We rate SUPERTEX INC (SUPX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, compelling growth in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.3%. Since the same quarter one year prior, revenues rose by 20.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SUPX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.29, which clearly demonstrates the ability to cover short-term cash needs.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 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 87.1% when compared to the same quarter one year prior, rising from $1.43 million to $2.68 million.
- The gross profit margin for SUPERTEX INC is rather high; currently it is at 55.86%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.42% trails the industry average.
- You can view the full analysis from the report here: SUPX Ratings Report