Semiconductors and Components

Microsemi Swoops in to Buy Vitesse

18 March 2015

Defense and communications chip supplier Microsemi Corp. has offered to buy Vitesse Semiconductor Corp., a fabless supplier of Ethernet networking ICs, for $389 million. The offer of $5.28 per share represents a 32 percent premium over the average price of the Vitesse shares in the 30 days preceding the offer.

The board of directors of Vitesse (Camarillo, Calif.) is recommending stockholders accept the offer. The deal is expected to close in Microsemi's fiscal third quarter, ending June 28. Microsemi has received support agreements from Vitesse stockholders holding approximately 22 percent of Vitesse's outstanding common shares.

Vitesse, founded in 1984, was one of the early pioneers of gallium arsenide and other compound semiconductor based ICs. However, as the frequencies of operation achievable climbed, Vitesse transformed itself into fabless supplier of high performance chips. Vitesse's products support network infrastructure markets including mobile access/IP edge, enterprise cloud access, and industrial-IoT networking.

Microsemi (Aliso Viejo, Calif.) is an FPGA and ASIC vendor that has focused on defense and communications applications. "The proposed acquisition of Vitesse by Microsemi will create a powerful combination," said Chris Gardner, Vitesse's chief executive officer, in a statement. "I believe Microsemi will be able to leverage Vitesse's Ethernet technology and capabilities further into the communications market and has the scale to implement the adoption of our industrial IoT strategy."

Vitesse posted a net loss of $5 million on net revenues of $24.8 million in the first quarter of fiscal 2015, which ended Dec. 31, 2014. The net sales were down from $27.1 million in the first quarter of fiscal year 2014, although management said this was a reasonable outcome considering the company is undergoing a product transition.

"Our customer profile continues to grow and evolve as our position strengthens in new, adjacent markets such as IoT and storage, which are literally reshaping our business and expanding our market opportunity," Gardner said at the time of the financial results announcement. "As Ethernet propagates into new markets, our total addressable market will triple from approximately $1 billion today to over $3 billion by 2020."

"Vitesse's highly complementary technology suite will expand our product offering and accelerate growth with differentiated technology in emerging markets, while benefitting from the increased scale, consolidated infrastructure and cost savings of the combined entity," said James Peterson, Microsemi chairman and CEO.

Another gallium arsenide pioneer and early rival to Vitesse, TriQuint Semiconductor Inc. (Hillsboro, Ore.) recently merged with RF Micro Devices Inc. (Greensboro, NC) to form Qorvo Inc.

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