Microsemi opens the hostilities

Contact: Brenon Daly

In a bear-hug letter last month, Microsemi warned fellow chipmaker Zarlink Semiconductor that it was ready to ‘take all necessary actions’ to consolidate the Canadian company. On Wednesday, that came to pass: Microsemi said it would bypass Zarlink’s board, which shot down the unsolicited offer, and take its $549m all-cash bid directly to shareholders. Incidentally, the opening of this hostile offer in the semiconductor industry came on the same day that SABMiller launched its $10bn hostile bid for Australian brewer Foster’s Group.

Going hostile in deals is relatively rare, as the drawn-out procedure can be expensive and disruptive to business on both sides. Further, in the tech industry, the conventional wisdom has always been that hostile approaches would cause an exodus of employees at the target company, undermining the very reason for the acquisition. (Given our realpolitik view of the world, we’ve always been a little bit skeptical about that bromide. We just can’t help but think back a few years ago to how PeopleSoft, with its culture of hugs and Hawaiian shirts, stood up to the relentless push by Oracle.)

Whatever the theoretical concerns, Microsemi must have certainly factored them in before launching the offer. The company says it has the financing in place, and will have its bid open through September 22. (Morgan Stanley and Stifel Nicolaus Weisel are advising Microsemi, while Ottawa-based Zarlink is relying on RBC Capital Markets.) It’s hard to know exactly which way Zarlink shareholders will go on this one, but we can’t help but note that shares on the Toronto Stock Exchange have already traded through the bid since Microsemi floated its offer.