Atmel says Microchip's proposal superior to Dialog's offer

(Reuters) - U.S. chipmaker Atmel Corp said it considered Microchip Technology Inc’s $3.42 billion cash-and-stock proposal superior to an offer from Dialog Semiconductor Plc.

Atmel said on Wednesday that Microchip had offered $7.00 per share in cash and $1.15 in Microchip stock, totaling $8.15 per share.

Atmel shares rose 3.8 percent to $7.97 in afternoon trading, while Microchip’s shares were up 3.3 at $43.25.

Dialog’s shares, which have slumped 42 percent since its agreement with Atmel in September, jumped more than 14 percent in Frankfurt.

Both Atmel and Microchip make microcontrollers that are used in a wide array of products - from touchscreens to automobile electronics.

“(A deal) could make Microchip a very formidable force in the microcontroller area,” Stephens Inc analyst Harsh Kumar said.

Atmel said it notified Dialog on Tuesday that it intended to terminate its deal with the company and enter into a definitive merger agreement with Microchip.

Kumar said it was unlikely Dialog would be able to counter Microchip’s offer. “If they counter, they will have to put up a significantly higher level of cash.”

Microchip’s offer will remain open to a counter bid until Jan. 19.

Dialog in September offered $4.65 in cash and 0.112 of its American depositary shares for each Atmel share, pegging the deal value at $4.6 billion at the time.

At the time, the per-share offer was equivalent to $10.42 per Atmel share.

If Atmel terminates its deal with Dialog, it will have to pay $137.3 million to the company.

Microchip said the deal is expected to immediately add to its adjusted earnings.

It is not the first time Microchip has tried to buy Atmel. The company made an unsolicited bid for Atmel in 2008 and then launched a proxy fight, which it later withdrew.

Qatalyst Partners is Atmel’s financial adviser for the deal and Jones Day is its external legal adviser.

J.P. Morgan is Microchip’s financial adviser, while Wilson Sonsini Goodrich & Rosati PC is the legal adviser.

Reporting by Kshitiz Goliya in Bengaluru; Editing by Kirti Pandey