Why PMC-Sierra Inc Gained 76% in October

By Anders BylundFool.com

PMCS data by YCharts.

What: Shares of PMC-Sierra gained 75.9% in October, according to data from S&P Capital IQ. The designer of semiconductors, software, and integrated modules that help device builders move large amounts of data is a buyout target right now.

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So what: More than that, actually; PMC is in the midst of an honest-to-goodness bidding war, as Skyworks Solutions and Microsemi fight to gain the company's hand in metaphoric matrimony.

Now what: You can play along at home by following PMC's share price jumps in the preceding chart:

  • Skyworks stepped up to the plate on Oct. 6, launching an all-cash takeover bid at $10.50 per PMC share. This deal was pre-approved by both boards of directors, and worked out to a total value of roughly $2 billion. PMC shares jumped more than 30% that day.
  • Oct. 19, Microsemi joined the fray. A $2.2 billion offerbacked by 76% cash and 24% Microsemi shares valued the stock at $11.50 per stub. PMC's stock rose 14% further, but this was a hostile bid and the target company's board didn't have much to say this time.
  • Microsemi sweetened its offer to $11.88 per share on Oct. 30,causing another small jump on PMC's stock charts.
  • Skyworks immediately rushed in with another offer, this time worth $10.60 per PMC share and including a stronger termination fee.

That was the end of October, but not the end of the bidding action. PMC affirmed its commitment to Skyworks on Nov. 1, citing the greater certainty of an all-cash agreement compared to Microsemi's partly share-based offer.

Oh, but that's not all. On Nov. 10, Microsemi shortened the timetable for its deal while keeping all other terms the same, and now claims that PMC's board has notified Skyworks that it wants to go with the new Microsemi offer.

And the beat goes on: Skyworks is sure to respond to Microsemi's latest gambit, and PMC-Sierra's future is still up in the air. But in the meantime, the battle of bids lifted PMC's shares by 76% in October (while Microsemi gained 10% and Skyworks shares fell 8%).

The article Why PMC-Sierra Inc Gained 76% in October originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Skyworks Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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