Dialog Semiconductor Plc fell the most in nine years in Frankfurt trading after agreeing to buy Atmel Corp. for about $4.6 billion -- more than its own market value -- to expand into the automotive industry and everyday objects that are increasingly connected to the Internet.

The cash-and-stock offer values San Jose, California-based Atmel, a maker of chips used in industrial machinery and cars, at $10.42 a share, equivalent to a premium of 43 percent based on the stocks’ closing prices on Friday. Strategic buyers on average paid a premium of 19 percent in comparable chip-industry transactions in the past 12 months, according to data compiled by Bloomberg.

“The deal leads to a massive dilution to existing Dialog shareholders,” said Thomas Becker, an analyst at Commerzbank AG, who cut his rating on the stock to "hold" from "buy." “While we see the positive implications in the long term, there will be a lot of integration work in the next two to three years, and that’s not without risks."

Dialog shares fell 19 percent to close at 36.75 euros in Frankfurt, the steepest decline since April 2006 and giving the company a market value of 2.9 billion euros ($3.2 billion). Atmel rose 13 percent to $8.22 in New York.

Reading, England-based Dialog, which supplies chips used in Apple Inc.’s iPhone and iPad, is seeking to move on after a plan to combine with Austria’s AMS AG to create a European specialist in smartphone chips fell apart last year. Chief Executive Officer Jalal Bagherli said Dialog had to compete with other bidders to win Atmel, a deal that would add complementary products for the automotive industry and so-called Internet of things to create a company with $2.7 billion in annual revenue.

Both companies’ boards support the deal, which is expected to be completed in the first quarter of 2016, subject to regulatory and shareholders approval. Atmel said last month it was considering strategic options, and China Electronics Corp. was said to have held preliminary talks to acquire Atmel.

“We passed the computing era, we’re at the height of the mobile era, and we’re about to enter the IOT era,” Bagherli, who’ll lead the enlarged company, said in a phone interview. “Companies are trying to position themselves.”

By: DocMemory
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