I don't know MXL at all, but if they are a US company I would think that China (and perhaps Taiwan) wouldn't want control of flash controllers moving to the USA.
SIMO is in perhaps 33% of PCs and 25% of cell phones. It just a flash controller, but they're ubiquitous.
Maybe that's the reason for discount, getting by the regulators?
Also, I think the acquisition price (call it $115) is pretty cheap. SIMO will probably make $9.00 in 2022, and SIMO will end the year with about $10 cash per share, so ....... they're paying 10.5x PE? SIMO grew 17% in 2020, 70% in 2021 and forecasts 20%-30% growth in 2022, and just beat Q1 forecasts. 10.5x for that growth? Seems too low.
SIMO didn't do an earnings release conference call as scheduled today. And normally SIMO puts in every press release guidance for the following quarter, and updated guidance for the full year. They left the detailed guidance out of today's press release (why?), so it makes it tough to tell if 2022 20%-30% sale growth is still expected, but if it's anything close to that........why only 10.5x? Put SIMO's sales and earnings inside of any diversified semi company and voila, you've got a semi normal PE of 15x.......why sell for less than that?
Maybe they were going to lower forward guidance? In this case, the sale makes complete sense, and mostly cash even, so well done. If not, it's too low I think.
And the $150m break up fee isn't enough to stop an interested counter buyer - it's only $4.50 per share. MRVL could buy SIMO for $170 per share in an all stock deal, and it would immediately be accretive to MRVL's EPS, and remove a potential competitor in enterprise flash controllers. |
