ON Semi backs out of bid for Atmel

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/18/2008

ON Semiconductor Corptoday announced that it is withdrawing from the unsolicited proposal it made with Microchip Technology Incto acquire Atmel Corp.

The move comes less than a week after the two Arizona-based companies claimed their intention to acquire Atmel was strong and that they remained "fully committed" to their proposed $5 per share bid for the San Jose-based company.

The duo made the original bid, which valued Atmel at approximately $2.3 billion, in early October. Atmel rejected the bidin late October, primarily claiming the price undervalued its stock's future potential.

In making their original proposal, Microchip and ON Semi said the deal would be financed in part by the sale of Atmel's nonvolatile memory, RF, and automotivebusinesses to ON Semi, which currently competes with Atmel in the spaces. Microchip, which competes with Atmel on the MCU end, had further intended to dispose of Atmel's ASICbusiness if the proposed acquisition had gone through.

Atmel pointed out last week that ON Semi had not filed for antitrustclearance for its proposed acquisition of the nonvolatile memory, RF, and automotivebusinesses, and that the company did not intend to do so until the execution of an acquisition agreement with Atmel. Atmel had also question ON Semi's ability to finance such an acquisition.

¡°While we believe that Atmel¡¯s nonvolatile memory and RF and automotivebusinesses would be an attractive strategic acquisition, we have decided to withdraw from the proposal due to the unforeseen deterioration in the semiconductor market since we announced our proposal, as well as the unprecedented weakness in the financial markets,¡± Keith Jackson, ON Semi's president and CEO, said in a statement this morning.

Meanwhile, Microchip has yet to give up its fight for Atmel, a Microchip competitor in the MCU space. 

¡°We are disappointed that difficult semiconductor industry and financial market conditions have resulted in ON Semiconductor withdrawing from our joint proposal to acquire Atmel. As a result of ON Semiconductor¡¯s withdrawal, Microchip must also withdraw its $5 per share offer for Atmel," Steve Sanghi, Microchip's president, CEO, and chairman, said in the statement. "However, Microchip intends to evaluate its potential alternatives for pursuing a transaction without ON Semiconductor.¡± 

It would not be unheard of for Microchip to return with a lower bid for Atmel. Atmel's stock, ATML, was trading at $3.30 as of 10:02am eastern this morning, down from its previous close of $3.99. Like many tech stocks, ATML has been on a rollercoaster ride since the economic turmoil hit in September. Since then, ATML hit a low of $3.28 on October 1, the day the proposed Microchip-ON Semi bid was made public, and a high of $4.55 on November 7. ATML's 52 week range shows a low of $2.50 and a high of $4.78.

For its part, Atmel said that it continues to focus on shareholder value through its transformation plan, which has included staff cutsand fab sales, and that "the decision by Microchip and ON to withdraw their unsolicited, unfinanced proposal underscores our board¡¯s determination that the proposal was highly conditional and subject to significant execution risk."