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Shares of Sigma Designs Inc. (NASDAQ: SIGM) were up 23.7% as of 2:45 p.m. EST Friday, after the system-on-a-chip semiconductor specialist agreed to be acquired by Silicon Laboratories (NASDAQ: SLAB).
More specifically, Silicon Labs will purchase Sigma Designs for $7.05 per share in cash -- good for a premium of 24.8% over yesterday's close -- in a deal valued at roughly $282 million.
The move will significantly expand Silicon Labs' wireless portfolio, particularly with smart-home solutions like Sigma Designs' Z-Wave technology.
"The connected home represents one of the largest market opportunities in the [Internet of Things]," stated Silicon Labs CEO Tyson Tuttle. "[...] By adding Z-Wave technology to Silicon Labs' connectivity portfolio, we will be better positioned to serve this fast-growing market."
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Sigma Designs CEO Thinh Q. Tran called it an "exciting day" for his company, adding: "Silicon Labs and Z-Wave share a vision of secure, interoperable smart homes. This transaction provides immediate value to our shareholders, and offers new growth opportunities for our employees and customers to develop a wider range of leading-edge solutions."
Silicon Labs also stated it's in active discussions with prospective buyers to divest its media connectivity business, and plans to either divest or wind down its smart-TV business.
In the meantime, both companies' boards of directors have approved the transaction, and the deal is expected to close in the first calendar quarter of 2018. Alternatively, if "certain closing conditions are not met," both companies have agreed that Sigma Designs will instead sell its Z-Wave business to Silicon Labs for $240 million, contingent upon the approval of Sigma shareholders.
With shares of Sigma Designs now trading just 1.4% below the agreed acquisition price for the entire business -- and assuming waiting to sell wouldn't result in a more favorable long-term capital gains tax treatment -- I think Sigma investors would do well to take their profits and put them to work elsewhere.
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