Chinese cellphone chip designer Spreadtrum Communications Inc SPRD.O is set to be acquired by a state-owned Chinese company in a $1.78 billion deal likely to improve its links to mobile carriers in the world's most populous country.
In a sweetened offer, a unit of government-owned Tsinghua Holdings Co Ltd offered to pay $31 per American Depositary Share (ADS) for Spreadtrum. This was 9 percent above its previous bid in June.
Shares in Spreadtrum rose 12.7 percent to $29.80 on the Nasdaq, lagging the 17 percent premium to Thursday's closing price offered by Tsinghua Unigroup Ltd.
Headquartered in Shanghai, Spreadtrum develops chips for smartphones, feature phones and other consumer electronics products. Its chips support 2G, 3G and 4G wireless communications standards.
Needham & Co and Topeka Capital Markets reduced their ratings on the company's stock to "hold" from "buy", and said they believed rival bids were unlikely.
"As a China state-owned enterprise, Tsinghua can increase Spreadtrum's relationships with carriers such as China Mobile (0941.HK)," Topeka analyst Suji De Silva wrote in a note.
Spreadtrum, which gets most of its sales from China and South Korea, counts HTC Corp (2498.TW) and Samsung Electronics (005930.KS) among its customers and had $720 million in revenue last year.
Tsinghua will offer Spreadtrum expertise in consumer products, protection and support of a vast IP portfolio, as well as access to capital markets in China, Tsinghua Unigroup Chief Executive Zhao Weiguo said in a statement.
Tsinghua Holdings is a Chinese government-owned corporation funded by Tsinghua University, and controls companies such as Chengzhi Shareholding Co Ltd (000990.SZ) and technology firm Unisplendour Co Ltd (000938.SZ).
Spreadtrum said its board recommended that shareholders accept the offer. Shareholders will meet soon to consider the deal, it said in the statement.
Spreadtrum, which has a market capitalization of $1.28 billion, said in June it had received a $1.38 billion, or $28.50 per ADS, takeover offer from Tsinghua.
Morgan Stanley Asia gave fairness opinion to Spreadtrum and Fenwick & West LLP provided legal advice. Morrison and Foerster LLP gave legal advice to Tsinghua.
Spreadtrum's shares have risen 18.6 percent since it received the offer in June. They closed at $26.45 on the Nasdaq on Thursday.
(Editing by Sreejiraj Eluvangal and Robin Paxton)