ON Semiconductor, Microchip withdraw hostile bid for Atmel

Chip maker ON Semiconductor has dropped its hostile $2.3 billion bid for Atmel Corp, which it had jointly made with Microchip Technology Inc, citing global financial turmoil that has rendered the semiconductor industry weak.

ON Semiconductor jointly with Microchip Technology had made a hostile bid for San Jose, California-based Atmel at $5 per share, valuing the company at $2.3 billion in October and Atmel board had rejected the bid saying it undervalued the company.

The bid represented a 52 per cent premium over Atmel stock's closing price a day before the offer was made.

The Amtel board said the hostile bid was not in the best interest of the company and its stockholders.

San Jose, California-based Atmel designs and manufactures microcontrollers and started a restructuring plan that included shutting down and selling some of its non-core manufacturing facilities. It also implemented an 18 per cent reduction in the company's workforce, thereby saving $125 million in costs this year, which was in excess of its target of $80 million to $95 million.

Atmel's board, which decided to ward off the unsolicited bid, said that ON and Microchip did not have the capability to raise money in adverse market conditions and justified its opposition to the valuation of the company right from the beginning.

As recently as last week, ON and Microchip had said that it would continue with its attempt to acquire Atmel, although it had rejected the bid and Steve Sanghi, the head of Microchip, and Keith Jackson, ON's chief executive, said they wanted to take the offer directly to Atmel's shareholders and also proposed to change the directors in Atmel's next shareholders meeting.

ON and Microchip also said the deal had received the necessary clearance from antitrust regulators and would finance the deal partly by selling Atmel's nonvolatile memory and automotive units.

Microchip said it was disappointed that ON Semiconductor quit the joint bid, but Microchip said it "intends to evaluate its potential alternatives for pursuing a transaction without ON Semiconductor."

''We are disappointed that difficult semiconductor industry and financial market conditions have resulted in ON Semiconductor withdrawing from our joint proposal to acquire Atmel,'' ON Semiconductor and Microchip said in a joint statement.

ON's president and chief executive Keith Jackson said the "unforeseen deterioration in the semiconductor market" as well as the global financial turmoil made his company withdraw from the bid.

"The decision by Microchip and ON to withdraw their unsolicited unfinanced proposal underscores our board's determination that the proposal was highly conditional and subject to significant execution risk," Atmel said in a statement.

Atmel said it will remain focused on its "transformation plan to ensure that Atmel's stockholders fully realize the value inherent in the company."

Atmel had reported a loss in the third quarter because it changed its European distribution model, which saw its revenue fall 4 per cent to $400 million.