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While key industry players assembled today (Monday) in Barcelona for the Mobile World Congress, a key mobile chipmaker merger played out on Wall Street.
Billed by both chipmakers as a merger of equals, TriQuint and RF Micro will form a new company with a new name and new leadership that will offer a broader range of mobile chips. The companies say the deal will provide growth opportunities in the mobile devices, network infrastructure, and aerospace/defense sectors.
The deal works out to $9.73 for each TriQuint share, a 5.4% premium to Friday's close.
In a nod of approval from shareholders on both sides, TQNT shares surged 25% intraday to $11.76, a 52-week high. RFMD shares jumped 21.5% to $7.06, also a 52-week high.
This is why the deal is so profitable…
A Solid Mobile Strategy
Chipmakers are racing to deliver the next big thing for cellular networks and mobile devices. RFMD and TQNT hope the two combined companies are better than one standalone.
TriQuint makes specialized communications chips for smartphones and communications networks. Its biggest customer is Apple Inc. (Nasdaq: AAPL) contractor FoxConn. RF Micro designs and manufactures high-performance radiofrequency products and solutions for applications that drive wireless and broadband communications.
"The world's demand for mobile data is growing exponentially," RF Micro Chief Executive Officer Bob Bruggeworth said in a statement. "With this merger of equals, we will bring under one roof all of the critical RF building blocks necessary to innovate at the heart of what makes mobile mobile – the crucial back-and-forth data flow between the mobile device and the network."
Indeed, mobile traffic data surged 81% worldwide last year to 18 times the size of the entire Internet in 2000, according to Cisco Systems Inc. (Nasdaq: CSCO). By 2018, global mobile data traffic is forecast to increase by more than 10 times the current pace.
The combined company is expected to generate revenue of more than $2 billion. In addition, the tie-up is projected to achieve at least $150 million in cost synergies, $75 million in annualized synergies the first year after closing, and another $75 million the second year.
And shareholders might not have seen these gains if it weren't for yet another pushy activist investor…