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How Will A Higher Bid For PMC-Sierra Impact Skyworks?

Microsemi submits a higher bid for PMC-Sierra to trump the $10.50 offer from Skyworks Solutions.

The smaller Microsemi projects larger synergies, but plans on adding a substantial debt load.

Skyworks remains a cheap stock whether or not it realizes the accretive benefits of a deal with PMC.

Prior to the morning open, Microsemi (NASDAQ:MSCC) announced that it has submitted an offer for PMC-Sierra (NASDAQ:PMCS) that exceeds the offer from Skyworks Solutions (NASDAQ:SWKS). Not surprising, PMC surged to new highs, even topping the most recent offering. Considering the synergies and accretive nature of the deals, one might rightfully assume that a higher bid will eventually arrive.

After originally turning bullish on Skyworks Solutions based on a generally cheap stock prior to the deal and one with an extremely attractive profile, the loss of PMC is a concern. The question is what to do with Skyworks, assuming it has to increase the offer to eventually secure the deal for PMC.

How The Offers Differ

Microsemi reportedly submitted a proposal to PMC valued at $11.50 per share. The deal trumps the $10.50 offer by Skyworks Solutions. The prime difference in the deals is that PMC is offering $2.75 per share in stock, compared to an all-cash offer from Skyworks.

Another noticeable difference is that Microsemi offers annual cost synergies of more than $100 million. The amount...