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Dialog Semiconductor to Buy Atmel for $4.6 Billion

Acquisition of the U.S. firm will allow the German chip maker to diversify beyond the crowded mobile market.

Dialog Semiconductor

German chip maker Dialog Semiconductor has agreed to buy U.S. rival Atmel for about $4.6 billion, amid a wave of dealmaking in the sector as firms seek alternatives to saturated mobile phone markets.

Dialog, which is heavily exposed to Apple and Samsung, said the deal would diversify its client base in automotive markets as well as network-connected chips used in industrial gear, the so-called Internet of Things.

Worldwide semiconductor mergers and acquisitions reached $31 billion in 2014, the most since 2011, according to Thomson Reuters data, and the pace has not let up this year.

Through acquisitions, chip makers are looking to gain share of solid markets such as industrial and automotive, where there is growing demand to make products “smart” by adding Internet connections.

“By bringing together our technologies, world-class talent and broad distribution channels we will create a new, powerful force in the semiconductor space,” Jalal Bagherli, Dialog’s chief executive, said in a statement.

Major deals have included Infineon’s $3 billion purchase of U.S. peer International Rectifier last year as well as NXP’s announcement in March that it would acquire U.S. peer Freescale Semiconductor, valuing the combined group at more than $40 billion.

Dialog said Sunday that Atmel shareholders would receive $4.65 in cash and 0.112 of a Dialog Semiconductor American Depository Share for each Atmel common share, equivalent to $10.42 per Atmel share based on Dialog’s closing price as of Sept. 18.

This represents a 43-percent premium over Atmel’s closing price of $7.27 on Friday.

Dialog said it planned to pay for the deal via cash, $2.1 billion of debt and about 49 million Dialog American Depository Shares. Following the transaction, Atmel shareholders will own about 38 percent of the combined group, Dialog said.

The transaction, expected to close during the first quarter of 2016, will boost Dialog’s earnings in 2017, Dialog said, and result in annual cost savings of $150 million within two years.

(Addditional reporting by Harro ten Wolde and Eric Auchard; Editing by Andrew Roche)

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