Microchip says will nominate slate for Atmel board

SAN FRANCISCO, Nov 12 (Reuters) - Microchip Technology Inc (MCHP.O) said on Wednesday it would seek to replace Atmel Corp's board with its own candidates, signalling its determination to acquire the rival chipmaker even as the turbulent markets continue to capsize deals all around.

Last month, Microchip and ON Semiconductor Corp (ONNN.O) jointly made an unsolicited offer to buy Atmel for $2.3 billion. Atmel rejected the $5 a share offer, saying it undervalued the company.

The companies had no choice but to turn hostile after Atmel's rejection, although they would rather engage in discussions, the chief executives of Microchip and ON Semi said in a statement.

"Given the response of the Atmel board, Microchip intends to take the offer directly to Atmel's shareholders by proposing an alternate slate of directors for Atmel's next shareholders meeting," Microchip CEO Steve Sanghi and ON Semi CEO Keith Jackson said.

The two executives also said they remain "fully committed to our offer despite unprecedented weakness and volatility in the equity markets."

Several companies have abandoned hostile pursuits in recent weeks, as acquirers find it tough to raise debt to finance purchases, and target companies insist that uncertain markets make it hard to value their stock accurately.

South Korean electronics giant Samsung Electronics (005930.KS) recently dropped its $5.8 billion bid for U.S. flash memory maker SanDisk Corp (SNDK.O). Vishay Intertechnology (VSH.N) also abandoned its pursuit of rival International Rectifier (IRF.N).

Atmel last month raised the concern that ON Semi may not be able to raise cash to finance its part of the proposal given the credit environment.

ON Semi has itself reached out to private equity firms in search of cash to finance the deal, seeking alternatives to issuing debt, sources have told Reuters.

The proposed transaction would involve Microchip buying Atmel for $5 a share and then selling Atmel's nonvolatile memory, radio frequency and automotive businesses to ON Semi.

ON Semi's Jackson has said the company could pay up to $1 billion for those assets, using its own cash and additional financing.

ON Semi said on Wednesday it expects to get regulatory approval to buy those Atmel assets.

Microchip said it has already received antitrust clearance to acquire Atmel under the Hart-Scott-Rodino Antitrust Improvements Act.

The companies did not say whom they plan to nominate to Atmel's seven-member board.

Atmel disclosed in a Nov. 10 regulatory filing it has amended its shareholder rights plan, or poison pill, to prevent Microchip and ON Semi from acquiring more than 10 percent of the company, down from 20 percent.

Microchip said on Wednesday it owns 4.1 percent of Atmel's stock, which closed Tuesday's session down 2 percent at $4.27 on the Nasdaq. (Reporting by Anupreeta Das; Editing by Gary Hill)