MediaTek Inc (聯發科), which competes with Qualcomm Inc in the handset chip market, yesterday said it is to acquire power management chipmaker Richtek Technology Corp (立錡科技) for about NT$28.96 billion (US$879.3 million) in cash, marking the latest in a slew of mergers and acquisitions in the world’s semiconductor industry this year.
MediaTek’s acquisition came after NXP Semiconductors said it would acquire Freescale and Avago Technologies Ltd announced its takeover of Broadcomm Corp earlier this year.
Those mergers and acquisitions “indicate the semiconductor industry is consolidating in terms of technology. Under such circumstances, every company in the supply chain needs to think how to reposition itself in the industry,” MediaTek chairman Tsai Ming-kai (蔡明介) told a media briefing.
Photo: CNA
“We need to expand our market share in our core business and to tap into new areas, such as the Internet of Things for new growth via strategic alliances. Collaborating with Richtek will help us have greater influence in the system chip market and to enhance our capabilities of developing power management ICs,” he said.
In the first half of this year, semiconductor acquisition agreements had a combined value of US$72.6 billion, which is six times the annual average for merger-and-acquisition deals struck from 2010 to last year, according to IC Insights’ tally.
MediaTek plans to compete its buyout of Richtek in the second quarter of next year. The acquisition is to be conducted in two stages. Richtek will be delisted from the main bourse and operate as a fully owned subsidiary of MediaTek after the transaction is complete.
MediaTek yesterday said it has signed a letter of intent with Richtek to buy between 35 percent and 51 percent share of Richtek at NT$195 per during a one-month period from today to Oct. 7.
The offer presents a 4.28-percent premium compared with Richtek’s closing price of NT$187 yesterday.
The acquisition of Richtek would add 5 percent to MediaTek’s annual net profits, “but the cost is also higher as MediaTek will use nearly 20 percent to 25 percent of its net cash,” Yuanta Securities Co (元大證券) analyst George Chang (張家麒) said in a report yesterday.
“In sum, we don’t expect the market to get too excited about MediaTek because of this deal,” Chang said, citing limited synergy. Chang retained his “hold” rating on both MediaTek and Richtek unchanged.
Richtek, which counts Samsung Electronics Co as one of its clients, last year made NT$1.5 billion in net profit on revenue of NT$11.93 billion. The company employed 927 people as of March this year. No layoffs are planned after the company acquisition.
In a separate statement, MediaTek posted its strongest monthly revenue for last month at NT$19 million, paving the way for the company to meet its quarterly revenue target.
Last month’s figure represents 6.1 percent growth from NT$17.91 billion in July. That was the highest since March.
The Hsinchu-based chipmaker made a combined NT$36.91 billion, indicating that MediaTek will reach the low end of its revenue goal of NT$51.7 billion by making NT$15.79 billion this month.
“The company is likely to post a 12 percent month-on-month decline in revenue for this month, achieving the mid-point of guidance,” Credit Suisse analyst Randy Abrams said in a report issued yesterday.
Abrams expects MediaTek to grow its revenue by about 15.73 percent sequentially to NT$54.44 billion in the current quarter.
MediaTek forecast that revenue this quarter would be between NT$51.7 billion and NT$55.5 billion.
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