Spreadtrum Communications Inc. (SPRD:US) soared after a division of a Chinese university offered to buy the mobile-chip maker for $1.5 billion in the largest proposed acquisition of a semiconductor maker in about a year.
The American depositary receipts leaped 16 percent to $25.91 today, the biggest jump since September 2009, after the investment unit of state-owned Tsinghua University bid $28.50 per ADR. Spreadtrum’s board is reviewing the unsolicited offer, the Shanghai-based manufacturer said today in a statement.
The bid, which Spreadtrum and Tsinghua valued at $1.5 billion, is equivalent to 10.3 times earnings before interest, taxes, depreciation and amortization, in line with the median multiple in a survey of almost 90 comparable deals over the past decade, according to data compiled by Bloomberg.
“In terms of revenues and earnings, this company can go much higher than current levels,” Jay Srivatsa, an equity analyst at Chardan Capital Markets LLC in New York, said in a telephone interview. “The offer is definitely lower than the company’s fair value.”
Srivatsa, who rates Spreadtrum a buy, said Spreadtrum is worth $30 per ADR.
The Beijing-based bidder, Tsinghua Unigroup Ltd., sees Spreadtrum “as an excellent strategic fit” with its “overall commercial objectives,” Tsinghua Unigroup Chairman Zhao Weiguo said in a statement.
The acquisition (SPRD:US) would be the largest in the industry since Micron Technology Inc. offered to buy Elpida Memory Inc. for $4.4 billion in July 2012. There have been $111 billion of deals in the industry announced in the past decade, including the $16.2 billion private-equity led buyout of Freescale Semiconductor Inc. in 2006.
Spreadtrum was targeted by short seller Muddy Waters LLC in June 2011 with accusations that the company’s accounting was erroneous. Spreadtrum denied any problems, and the shares have doubled since Muddy Waters’s report on the chipmaker.
Some U.S.-traded Chinese companies have chosen to go private after allegations by short sellers drove down their prices. Tree-plantation operator Sino-Forest Corp. plunged 74 percent before eventually filing for bankruptcy.
Digital advertising company Focus Media Holding Ltd. delisted its shares from Nasdaq last month after completing its $3.8 billion privatization deal. Muddy Waters first accused the company in 2011 of exaggerating its advertising network.
Twenty-three U.S.-traded Chinese companies completed their buyout deals since the beginning of 2010, out of a total 43 announced, according to data compiled by Bloomberg.
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