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WRAPUP 1-Atmel rejects Microchip, ON acquisition offer

* Atmel rejects $2.3 bln buyout offer

* Atmel calls Microchip, ON offer ‘opportunistic’

* Q3 net loss 1 penny/share

* Q3 profit excluding items beats Street estimate

* Q3 revenue $400 mln versus Street view $400.8 mln

By Anupreeta Das and Gabriel Madway

SAN FRANCISCO, Oct 29 (Reuters) - Atmel Corp ATML.O on Wednesday rejected a $2.3 billion acquisition offer from rival chipmakers Microchip Technology Inc MCHP.O and ON Semiconductor Corp ONNN.O, saying the bid was "opportunistic" and significantly undervalued the company.

Chief Executive Steven Laub said in a conference call that the company is committed to its restructuring plan, and that it expects to create greater value for shareholders than the $5-per-share takeover offer, which was made earlier this month.

At the time, the bid represented a premium of more than 50 percent.

Microchip and ON Semi both said they had no immediate comment on Atmel’s rejection.

Under the proposed transaction, Microchip would buy Atmel and then sell some assets to ON Semi. Microchip would have also tried to sell Atmel’s ASIC chips business.

Separately, sources told Reuters ON Semi is talking to private equity firms about selling a stake to raise cash in order to finance its part of the deal.


“We have great confidence in our ability to continue delivering on our commitments to ensure that Atmel shareholders realize Atmel’s full potential,” Laub said. “Microchip and ON’s proposal was opportunistically timed to capture this value for themselves.”

Laub said Atmel’s restructuring has led to the divestiture of 14 product lines, and has reduced the company’s workforce by 18 percent. The company is on track to achieve more than $125 million in cost savings in 2008, he said, and will continue to sell or shutter remaining businesses that do not meet its objectives.

Atmel plans to transform itself into a company focused on microcontrollers, which are chips used to control functions in products such as televisions. Microchip was interested in acquiring only Atmel’s microcontroller business.


The company also reported a net loss in the three months ended Sept. 30 of $4.7 million, or a penny a share, compared with a year-ago profit of $16.6 million, or 3 cents a share.

After excluding one-time charges, Atmel posted a profit that beat analysts’ expectations, according to Reuters Estimates, but it was not immediately clear by how much because of some special items recorded.

Revenue in the period fell to $400 million, compared with the $400.8 million analyst estimate, according to Reuters Estimates.

The company expects fourth-quarter revenue in a range of 3 percent down to 3 percent higher from the third quarter and expects to see continued improvement in its gross margins.

Echoing the forecasts of other chipmakers, Laub said Atmel is seeing soft demand, and he expects a challenging fourth quarter.

The shares of San Jose, California-based Atmel closed down 44 cents, or 11 percent, at $3.53, and fell 3 cents in extended trading. (Editing by Phil Berlowitz)