Microchip Technology to Acquire Standard Microsystems for $830 Million

Microchip Technology (News - Alert) Inc. has announced that it is purchasing Standard Microsystems Corporation for about $830 million, tapping into the automotive electronics market, Reuters (News - Alert) reports.

Standard Microsystems manufacturers chips used to transmit audio and video in cars made by Daimler, BMW, Audi and Harman, among others.

SMSC is valued at around $588.1 million with $84.6 million in revenue from the fiscal year 2011. The company manufactures microcontrollers for a variety of markets, including automotive applications.

The move comes as U.S. auto sales are expected to rebound this year after the recession of 2007-08.

Microchip CEO, Steve Sanghi, said in a conference call with analysts announcing the acquisition that the purchase would give the company access to the growing and lucrative market of in-car entertainment systems.

"We believe SMSC's smart mixed-signal connectivity solutions aimed at embedded applications are an ideal complement to Microchip's embedded control business," stated Sanghi, in a statement announcing the deal. “This acquisition will expand Microchip's range of solutions as SMSC contributes exciting new products and capabilities in the automotive, industrial, computing, consumer and wireless audio markets, significantly extending our served available market.”

Microchip has a market value of $6.77 billion and was trading at $37 per share when the announcement was made, approximately 41 percent higher than SMSC.

“SMSC is the leading vendor of media networking technologies for automobiles, with over an 80 percent share in the luxury market," Thinkequity analyst, Sujeeva De Silva, told Reuters. “But it's moving fast in the mainstream market in cars like Toyota, Volkswagen and GM.”

The $830 million offer by Microchip is based on SMSC's outstanding shares.

The acquisition, however, might face some opposition. The law firm of Glancy Binkow & Goldberg has announced that it is investigating the Board of Directors of SMSC.

“This investigation concerns whether the Board of Directors of Standard Microsystems breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into the proposed transaction, and whether the Company has disclosed all material information to shareholders about the transaction,” stated a statement by the firm. They cited the company's jump in share price from October 2011 to April 2012. They are soliciting information from shareholders that could help their investigation.