June 26, 2014 / 6:55 AM / in 3 years

AMS in talks to buy Dialog Semiconductor

FRANKFURT (Reuters) - Austrian semiconductor maker AMS (AMS.S) is in talks to buy Germany’s Dialog Semiconductor (DLGS.DE), a supplier of chips for Apple’s (AAPL.O) iPhone and iPad, the two companies said on Thursday.

“These discussions are at a very preliminary stage and there can be no certainty that a transaction will be forthcoming,” the companies said in a joint statement, confirming an earlier report in the online edition of The Financial Times.

They said that under takeover rules Switzerland-listed AMS must by July 24 either announce a firm intention to make an offer for Dialog or announce that it does not intend to do so.

AMS declined to make additional comments.

Shares in Dialog, which have gained almost 70 percent so far this year, jumped 8 percent in early trade to the top of a 0.8 percent stronger German technology index .TECDAX. That gives it a market value of about 1.8 billion euros ($2.5 billion).

AMS shares were up 7.5 percent in early trade, valuing the company at 2.2 billion Swiss francs ($2.5 billion).

The companies did not provide financial details in their statement but the Financial Times reported earlier that AMS and Dialog were working on a deal valuing the combination at 4.2 billion Swiss Francs ($4.7 billion).

A merger of the two could create an entity with combined annual sales of about $1.4 billion. Some 70 percent of Dialog’s roughly $900 million in revenue comes from Apple, which some analysts say makes it too dependent on a single customer.

Kepler Cheuvreux analyst Bernd Laux said in a note to clients that AMS’s sensors were the key missing part for Dialog to supply complete modules. “AMS would further diversify Dialog’s customer list and end-market exposure,” they added.

Harald Schnitzer, an analyst at DZ Bank, said a merger could make sense as the companies have complementary products and markets. “Furthermore purchasing power and better conditions with foundries partners could be possible,” he added.

Reporting by Harro ten Wolde and Maria Sheahan; Additional reporting by Angelika Gruber; Editing by Christoph Steitz and Mark Potter

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