Dialog Semiconductor In $6B Takeover Talks By Renesas Electronics

Dialog Semiconductor confirmed on Feb. 7 that it is in discussions to be acquired by Renesas Electronics following media reports of a potential deal.

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According to the talks, Renesas has offered €67.50 for each Dialog share as part of the takeover deal. Taking the current EUR-USD exchange rate into account and Dialog’s (DLGNF) outstanding shares of 71.9 million, the offer would value the deal at about $6 billion.

“There can be no certainty that any firm offer will be made for the Company, nor as to the terms on which any firm offer might be made,” Dialog stated.

The company added that according to British financial regulations, Renesas will be required by March 7 to either announce a firm intention to make an offer or that it does not intend to make an offer.

Shares of the chip maker were up by 8.2% and closed at $68.26 on Feb. 5. Dialog is expected to announce its 4Q results on March 3. In 4Q FY20, the company expects its revenues to come in between $436 million to $441 million. (See Dialog Semiconductor stock analysis on TipRanks)

Dialog is a major chip supplier to Apple (AAPL). In 2019, Apple had awarded Dialog a range of new contracts for the supply and development of mixed-signal integrated circuits (ICs).

Around three months back, BMO Capital analyst Ambrish Srivastava reiterated a Buy rating on the stock with a price target of $57.81 (15.3% downside potential).

Srivastava noted about the company, “…this is a seasoned management team and is not sitting idle, pivoting the business away from an over-reliance on one customer, to a diversified mixed-signal chip company, leveraging off on key differentiated and sticky building blocks such as power management, with a higher operating model.”

The rest of the Street is bullish about the stock with a Strong Buy consensus rating. That’s based on 9 analysts recommending a Buy and 3 analysts suggesting a Hold. The average analyst price target of $64.38 implies 5.7% downside potential to current levels.