Chip maker Skyworks Solutions to acquire peer PMC-Sierra

Woburn, Massachusetts-based chip maker Skyworks Solutions will acquire PMC-Sierra, another maker of semiconductors, for $2 billion in cash, the companies said today.

The deal will see shareholders of PMC – Sierra get $10.50 a share, a 37-per cent premium to the share price at the close on Monday. PMC makes semiconductors for telecommunications networks and storage.

According to Skyworks, it expected the acquisition to widen its customer base and the uses for its chips.

In a news release David J Aldrich, the chairman and chief executive of Skyworks, said he hoped to make the most of PMC-Sierra's data storage and transportation capabilities.

''Specifically, we plan to leverage PMC's innovative storage systems, flash controllers, optical switches and network infrastructure solutions,'' he said.

Gregory S Lang, the president and chief executive of PMC-Sierra, said in the same release, ''Given Skyworks' deep global sales channels and leadership applications support, underpinned by a world class supply chain, we could not have found a better partner.''

A wave of consolidation is sweeping the semiconductor industry as chip makers expand to meet the increased demand from customers like Apple. Mergers help chip makers to cut costs by combining work forces. Aldrich said he was looking to $75 million in savings from merging the companies, in addition to $0.75 in earnings per share each year.

"We plan to leverage PMC's innovative storage systems, flash controllers, optical switches and network infrastructure solutions to expand our engagements with some of the world's leading OEMs and ODMs as well as emerging hyperscale data center customers Aldrich said in a statement.

Skyworks, whose chips find applications in new iPhones, expects the deal to immediately add to earnings.

In a report last week Reuters said PMC-Sierra, which designs semiconductor equipment and develops software solutions for enterprises, cloud data centers and telecom carriers worldwide, was looking for to sell itself.

The deal, which had been approved by the boards of both would be funded through cash on hand and new debt.

The semiconductor industry had logged over $80 billion in dealmaking this year, which stood higher than every year on record, with the exception of 2000, when M&A in the sector hit $115.5 billion.