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Microchip Technology credited its 2015 acquisition of Micrel with helping drive fiscal 2016 sales growth, analog growth and market-share gains. But the records were Microchip’s consolidated results—not Micrel’s standalone results—and the available figures do not isolate the acquisition’s precise effect on earnings or quantify realized synergies.
What did Microchip acquire, and when?
On May 7, 2015, Microchip Technology announced a definitive agreement to acquire Micrel for $14 per share. Microchip estimated the deal’s equity value at about $839 million and its enterprise value at about $744 million after excluding Micrel’s cash and investments. The acquisition closed on August 3, 2015. Micrel shareholders approved the merger, with 98.95% of shares voted in favor.
The merger announcement described the companies’ portfolios as complementary in areas including linear and power management, LAN, timing and communications. Microchip said it expected synergies and cross-selling. That was the buyer’s forecast at announcement, not a quantified measure of benefits later realized. In the SEC-described transaction, each Micrel share converted into the right to elect cash consideration valued at $14 or stock consideration, subject to proration.
What did Micrel bring to Microchip’s portfolio?
Microchip’s current overview of its Micrel portfolio lists mixed-signal, analog and power semiconductors; LAN, timing and communications products; MEMS-based clock oscillators; crystal-less clock generators; Ethernet switches; and physical-layer transceiver ICs. It describes applications and customers across enterprise, consumer, industrial, mobile, telecom, automotive and computing markets. This company-provided portfolio summary helps explain the strategic fit, but does not establish how much revenue or profit any product contributed after the acquisition.
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Did the acquisition create Microchip’s first record results?
No. Microchip had already reported record results for fiscal 2015, before the Micrel deal closed. For the year ended March 31, 2015, the company reported $2.147 billion in GAAP net sales and $2.161 billion in non-GAAP net sales, as well as record non-GAAP diluted earnings per share of $2.66. Those figures are the pre-acquisition baseline, not results of the completed Micrel deal.
What changed in fiscal 2016?
For fiscal 2016, ended March 31, 2016, Microchip reported record GAAP sales of $2.173 billion and record non-GAAP sales of $2.214 billion. It also reported record non-GAAP diluted earnings per share of $2.68. These are separate accounting measures: the GAAP and non-GAAP sales figures should not be combined or treated as interchangeable.
Microchip said that growth in its analog business and market-share gains during fiscal 2016 reflected both organic efforts and the Micrel acquisition. Its Form 10-K gave a more direct explanation for the year-over-year sales increase: “The increase in net sales in fiscal 2016 compared to fiscal 2015 was due primarily to our acquisition of Micrel, offset in part by weaker general economic and semiconductor industry conditions.”
This is Microchip’s attribution of its reported sales change, not an independently calculated estimate of what sales would have been without Micrel. The cited results support saying the acquisition helped Microchip’s fiscal 2016 sales and analog business; they do not establish that Micrel alone caused every record or quantify a standalone earnings contribution.
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Why should fiscal 2017 records be treated separately?
Microchip reported further records in fiscal 2017: $3.408 billion in GAAP sales, $3.502 billion in non-GAAP sales, and non-GAAP diluted earnings per share from continuing operations of $3.99. But the company said the sales increase over fiscal 2016 was primarily due to the separate Atmel acquisition and also to growth in its historical business. Those later consolidated records therefore cannot be attributed to Micrel alone.
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What can be concluded about the deal’s impact?
- Established: Microchip completed the Micrel acquisition in August 2015 and reported record sales and non-GAAP diluted EPS for fiscal 2016.
- Management’s explanation: Microchip credited Micrel as a primary reason for the fiscal 2016 net-sales increase, while noting weaker economic and semiconductor-industry conditions. It also linked Micrel, alongside organic efforts, to analog growth and market-share gains.
- Not established by these figures: A standalone dollar value for realized synergies, a counterfactual sales or earnings result without Micrel, or proof that Micrel alone caused all of Microchip’s records.
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