Montage's increased offer comes to $19 per share, from its previous bid of $18.50. Diodes would pay $17.75 per share, but Pericom favors its financing, regulatory outlook and other factors.
The hostile campaign from Montage CEO Howard Yang, who has accused Pericom of irrationally favoring a lower bid, comes as the sector undergoes broader consolidation. The aggressive tenor may reflect an increasingly competitive M&A market.
In the bidding war for PMC-Sierra (PMCS) , Microsemi (MSCC) on Wednesday lodged a new $2.3 billion offer. PMC-Sierra already has a sale to Skyworks Solutions SWKS in place. Meanwhile, ON Semiconductor (ON - Get Report) said Wednesday it would pay $2.4 billion for Fairchild Semiconductor International (FCS) rather than see the company acquired by a competitor.
"There was a process here and this was a company that looked like it was going to do a transaction, we felt that the competitive dynamics made the most sense for us to do the deal rather than sit by and watch," ON Chief Executive Keith Jackson explained to shareholders in a Wednesday call, noting that the company has favored tuck-in acquisitions.
Buying Fairchild will help ON focus on markets such as cars and smart phones, increasingly important markets. While the semiconductor market for consumer products and computers are flat, the World Semiconductor Trade Statistics notes, automotive and wireless communications are growing faster than the overall chip market.
Jackson suggested that market and industry forces would lead to more deals. "As long as the rates in the financial markets remain relatively low and growth in the overall industry also remains low, we think it's inevitable there'll be further consolidation," he said.
Even with the recent spate of deals, the industry remains fragmented. ON's investor presentation included a list of 30 semiconductor companies that operate outside of the memory segment. At the top is Intel (INTC - Get Report) , which is buying Altera (ALTR - Get Report) for $16.7 billion. Next are Qualcomm (QCOM - Get Report) and Avago Technologies (AVGO - Get Report) , which is acquiring Broadcom (BRCM) for $37 billion.
ON is ranked 13th, but by acquiring 25th ranked Fairchild the company can jump to number 10. A merged Skyworks and PMC-Sierra would rank 12th, while an independent Microsemi would be 29th. A merged Diodes and Pericom would be 30th.
Pericom urged investors to vote for the sale to Diodes in a Wednesday press release.
The statement did not explicitly mention Montage, but took a dig at the company's offer. Periocom noted that Diodes' offer is "backed by a rock-solid, fully-funded term loan from a U.S. bank." Throughout Montage's pursuit, Pericom has questioned the company's financing and the regulatory risk that its bid carries.
The special meeting of Pericom shareholders is set for Friday. While the vote will resolve a the contest between Montage and Diodes, the great semiconductor bidding wars will continue.