Paul Singer’s hedge fund firm Elliott Management is well known as the “activist’s activist”, and Singer and Elliott are back at it again, this time in the semiconductor sector.
Elliott disclosed a 2.9% stake in European chipmaker Dialog Semiconductor this week, and said it plans to work with other co-shareholders to fight the proposed acquisition of U.S. semiconductor firm Atmel.
Of note, Dialog Semiconductor agreed to buy Atmel a couple of months ago for $4.6 billion as it is trying to beef up its industrial product and IoT portfolio.
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Dialog shares were down by a third since the announcement of the Atmel acquisition, but had bounced off its lows starting late last week. Shares were up more than 5% in early trading Tuesday.
More on Elliott and Dialog Semiconductor
Elliott sent an open letter to Dialog on Monday saying the planned transaction would clearly hurt Dialog’s value, and that Elliott was planning to urge other Dialog shareholders to join it and also vote against the takeover at the upcoming shareholders’ meeting on November 19th.
In the letter, Elliott quoted an analyst who said: “The move is a big fish to swallow from a deal multiple, financial and integration point of view.”
Elliott said based on the information at hand, it appeared that Dialog had agreed to pay a very high 92% premium for an “underperforming asset” and that going ahead with the deal would “destroy approximately $500 million of value” for Dialog shareholders.
Dialog Semiconductor is heavily exposed to both Apple and Samsung Electronics, and argues that the deal will significantly diversify its client base in automotive markets and the network-connected chips used in industry that will support the fast growing “Internet of Things” (or IoT).
To date, Elliott is the only major shareholder to publicly oppose the Atmel deal. That said, well-known shareholder advisory groups ISS and Glass Lewis have both advised Dialog shareholders it is in their best interest to oppose the too-expensive acquisition.