Cypress Semiconductor (CY), Maxim Integrated (MXIM) Takeovers Don't Seem Imminent - MKM

September 2, 2016 11:17 AM EDT
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Following MKM Partners' semiconductors bus tour, analyst Ian Ing said he gets the sense that takeout deals for Cypress Semiconductor (NASDAQ: CY) and Maxim Integrated Products (NASDAQ: MXIM) are not imminent.

On CY, he said: "After a line of questioning, we came away with the impression that a CY takeout is not imminent. With former CEO T.J. Rodger's recent retirement, there is probably a more neutral/objective bias towards evaluating acquisition offers as part of good corporate governance. However, a deal doesn't appear imminent given (1) CY's elevated investor access activities since the new CEO appointment and Broadcom IoT acquisition, (2) Interest in seeking (and receiving) greater sell-side analyst coverage as the industry consolidates and (3) they believe they are now above the minimum hurdle rate on scale to sufficiently invest and succeed in their opportunities."

On MXIM, he said: "MXIM is also a theoretical takeout candidate given their medium-size, asset light model, and successful power management IC franchise. We think a nearterm takeout is also unlikely, especially given that MXIM and (potential acquirer) Texas (TXN, Neutral, $69.7, $70 FV) have significant overlap and redundancy across their PMIC businesses. Longer term, we don't think Analog Devices (ADI, Neutral, $63.06, $67 FV) completely fills their power management hole with the pending Linear Technology (LLTC, NR, $58.66) deal, keeping the door open for MXIM at a later date. MXIM largely competes with TXN and Infineon (IFX, NR, $16.795), while there is far less overlap with LLTC, ON Semi (ON, Buy, $10.99, $13 PT) or Intersil (ISIL, Neutral, $20.25, $16 FV) given different end-market focus."

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