China Electronics Corp (CEC, 中國電子), China’s largest state-owned information technology company, is in preliminary talks to acquire US-based Atmel Corp, people with knowledge of the process said.
CEC is discussing a bid for Atmel, a maker of chips used in industrial machinery and cars, at about US$8.50 per share and the two sides are negotiating, said the people, who asked not to be identified as the information is private.
Atmel closed at US$8.18 in New York trading on Wednesday, down from a high of $10.44 in June, giving the San Jose, California-based company a market value of about US$3.4 billion.
There is no guarantee a deal will be reached and talks might still fall apart. The thin premium being discussed and regulatory scrutiny that would come with a Chinese buyer raise the risks that a deal will not materialize, according to one of the people familiar with the situation.
A combination of CEC with Atmel would probably be subject to approval from the US’ Committee on Foreign Investment, the person said.
There is also the possibility that other suitors could emerge and an agreement could be reached with a different company.
The thin premium implied by the offer price compared with Wednesday’s close is at odds with industry deals done earlier this year.
Intel Corp, the world’s biggest chipmaker, said in June that it was to pay US$54 per share for Altera Corp, 11 percent more than the company’s share price at the time and a 56 percent bump over where it had traded before speculation of an acquisition.
Atmel shares fell 9.2 percent in New York trading on Thursday, the largest decline in more than 11 months, to close at US$7.43.
Atmel last month said it has been considering strategic options. Any sale would extend a record year for semiconductor deals, as chipmakers combine to counter slowing growth and increasing costs.
China has been picking up US chip-related assets as it tries to flesh out its domestic capabilities and replace imports of crucial electronics components.
Atmel spokeswoman Agnes Toan said the company does not comment on rumors or speculation. A spokeswoman for Beijing-based CEC said she could not immediately comment.
CEC has more than 70,000 employees in operations including chip design, computer manufacturing and telecommunications equipment production, according to its Web site.
The group, whose Web site features a faded photograph of Mao Zedong (毛澤東) inspecting one of its radio factories in 1956, has at least a dozen listed units, including China Greatwall Computer Shenzhen Co (中國長城計算機深圳) and Nanjing Panda Electronics Co (熊貓電子).
Atmel specializes in microcontrollers, small chips that perform a range of functions such as converting the touch of a button into an action in a car or factory machine.
The company is trying to extend the use of its products into the Internet of Things — the spread of connectivity and electronic functionality into everyday items.
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