PMC-Sierra (PMCS) Stock Climbs as Microsemi Ups Takeover Bid

NEW YORK (TheStreet) -- PMC-Sierra  (PMCS)  stock is increasing 1.89% to $11.87 in early afternoon trading on Wednesday, as Microsemi (MSCC) raises its takeover bid for the company.

On Monday, PMC-Sierra said that it preferred a takeover bid from Skyworks Solutions (SWKS) over Microsemi's previous bid for the company.

Under the terms of the revised proposal, valued at $2.3 billion, PMC -Sierra shareholders would receive $9.22 in cash and 0.0771 of a share of Microsemi for each share of PMC. 

The new bid is expected to be immediately accretive to Microsemi's per-share earnings and free cash flow. Microsemi anticipates per-share earnings of 60 cents in the first full year after the deal's completion. 

"The board of PMC chose not to recommend to their shareholders our previous proposal, which was $0.17 per share higher than the existing offer from Skyworks," Microsemi CEO James J. Peterson said in a statement. "Our revised offer delivers even more value to shareholders and we have addressed PMC's preference in increasing the cash component of our proposal."

Separately, 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 compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

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 22.7% when compared to the same quarter one year prior, going from $5.47 million to $6.72 million.
  • PMCS's debt-to-equity ratio is very low at 0.05 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 1.37, which illustrates the ability to avoid short-term cash problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, PMC-SIERRA 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 $15.37 million or 31.54% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PMC-SIERRA INC has marginally lower results.
  • You can view the full analysis from the report here: PMCS

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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