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SAN FRANCISCO -- The tech industry's recent track record of unsolicited acquisition offers isn't inspiring.


Microchip Technology

(MCHP) - Get Microchip Technology Incorporated Report


On Semiconductor


don't seem fazed.

The two chipmakers raised the stakes in their joint pursuit of



Wednesday by announcing a plan to oust Atmel's board and replace it with a crew more amenable to a deal.

Wall Street was decidedly un-enthused by the move into hostile territory.

Shares of Atmel, Microchip and On Semi were all in decline in recent trading Wednesday.

Investors had been expecting Microchip and On Semi to increase their previous bid of $5 a share for Atmel, says one hedge fund manager speaking on condition of anonymity because he was trading some of the stocks involved.

Instead, the pair kept the bid at $5 a share, or $2.3 billion in total, and threw down the gauntlet of a proxy fight to replace Atmel's board members.

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Proxy fights are costly and distracting affairs for all parties involved, and success is never assured.

Just last month,

Vishay Intertechnology

(VSH) - Get Vishay Intertechnology Inc. Report

saw its plans to take over

International Rectifier


go up in smoke when IRF shareholders voted against a slate of three rival directors for the board nominated by Vishay.

Whether MicroChip and On Semi will fare any better at Atmel's annual shareholder meeting -- expected sometime this spring -- remains to be seen.

The two companies initially announced a plan to takeover Atmel in early October, with Microchip laying claim to Atmel's microcontroller business and On Semi eyeing the radio frequency and automotive chip businesses. The rest of Atmel would be sold to the highest bidder following the merger.

Atmel has sounded the familiar takeover-target talking points, popularized by companies like






, describing the bid as an opportunistic attempt to take advantage of its low stock price.

And despite posting a $4.7 million loss in the recently ended quarter due to restructuring charges, Atmel has cited the results, particularly its improved gross profit margin, as evidence that the company's own turnaround plan is getting traction.

"Atmel's strong third quarter results despite a very challenging macroeconomic environment further demonstrate Atmel's superior product and technology portfolio and the inadequacy of the value proposed by Microchip and On," the company said in a statement Wednesday.

Atmel's stock price has increased about 20% in the weeks after it rebuffed the offer, as investors anticipated a fresh, sweetened bid.

Even without a better offer, though, some investors may be satisfied with the existing bid, which represents a 52% premium over Atmel's closing price on Oct. 1, the day before the proposal was made. And, in a bear market, the offer still represents a 25% premium from where the stock is now.

"The market has gone down about 25% since then," says the hedge fund manager. "To me if you're doing what's right for the shareholders you take it. It's pretty simple."

Shares of Atmel were down 7%, or 30 cents, to $3.97 in recent trading Wednesday. Microchip's stock was off 3.5% at $20.15 and On Semi's stock was down 5% at $4.21.