Skyworks Snaps Up Silicon Labs’ Infrastructure and Automotive Business For $2.75B

Skyworks Solutions’ shares were up 4.4% in extended trading on Thursday as the semiconductor company announced the acquisition of the infrastructure and automotive business of Silicon Laboratories in an all-cash transaction valued at $2.75 billion.

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Shares of Silicon Laboratories (SLAB) shot up 12.3% after-hours on the news of the acquisition.

Skyworks Solutions’ (SWKS) President and CEO, Liam K. Griffin said, “We are pleased to welcome the Infrastructure & Automotive team to Skyworks when this transaction is completed. This acquisition will broadly expand our capabilities across high-growth end markets including automotive, communications and industrial, creating new and highly compelling opportunities for Skyworks.”

“By leveraging our global sales channels, operational scale and deep customer relationships, Skyworks is well positioned to drive above-market growth, while diversifying revenues, expanding margins and delivering strong returns in earnings and cash generation,” Griffin added.

The acquisition is expected to be immediately accretive to SWKS and is anticipated to close in the third quarter of this year. SWKS believes that Silicon Labs’ technology portfolios and related assets will be “highly complementary” to its connectivity portfolio.

With this acquisition, SWKS also expects to expand rapidly into different business segments including electric and hybrid vehicles, 5G wireless infrastructure, power supply, industrial and motor control, and optical data communication. This acquisition will enable SWKS to provide products to a market worth $20 billion annually. (See Skyworks Solutions stock analysis on TipRanks)

As a part of this acquisition, Mark Thompson, SVP of Silicon Labs and general manager of the Infrastructure & Automotive business, will join Skyworks and report directly to Skyworks’ CEO, Liam K. Griffin.

Following the acquisition announcement, Mizuho Securities analyst Vijay Rakesh reiterated a Buy and a price target of $207 on the stock. Rakesh said, “We see SWKS’s acquisition as a positive diversification opportunity into adjacent industrial & automotive markets with operational synergy potential, and a shift away from Mobile should be a positive as SWKS noted its top 10 customers would account for 30% of revenues with 4,000 customers making up the remaining 70%.”

Overall, consensus among Wall Street analysts is a Moderate Buy based on 12 Buys and 7 Holds. The average analyst price target of $208.25 implies upside potential of about 13.5% to current levels.