FBR Capital Raises Probability of Atmel (ATML) Takeover to ~40%

Just a few short days after naming Atmel (NASDAQ: ATML) his no. 1 takeout candidate in the semi sector, FBR Capital analyst Christopher Rolland is raising the probability of a deal and his price target on the stock to $12.00 (from $10.00). The update comes amid reports Monday afternoon that Atmel had hired Qatalyst Partners to explore strategic alternatives for the company including a possible sale.

Rolland commented, ". While details were scarce, this announcement comes interestingly just a few days after the company issued a change of control provision increasing compensation for executives in the event of an acquisition. ATML remains our top takeout candidate, and in light of the change of control provision, we are raising the odds of a buyout in the next 12 months from ~25% to ~40%. At the pace of consolidation set thus far this year, 32% of all U.S. publicly traded semiconductor companies would be acquired in 2015! While this run-rate is not likely sustainable and should slow as the year progresses, we still expect ~15% consolidation rates for the remainder of this cycle (above low-teens rates since the start of the decade). Therefore, we believe Atmel is 2.5 times more likely to be purchased than the average U.S. semiconductor company, primarily owing to the robust accretion opportunities presented to an acquirer (we think Atmel’s 2016 EPS are worth 2x to an acquirer)."

He added, "Stepping back, we think the Street underestimates the true earnings power of Atmel given (1) the intermediate-term cyclical recovery in the core MCU business, (2) new opportunities for IoT products, (3) differentiation through integrated maXTouch and MCU combo products, and (4) new engagements for crypto-memory products. We maintain our Outperform rating but raise our price target from $10 to $12 to reflect the results of our latest accretion analysis and higher probabilities of takeout."

For an analyst ratings summary and ratings history on Atmel click here. For more ratings news on Atmel click here.

Shares of Atmel closed at $9.75 yesterday.

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