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   Technology StocksSilicon Motion Inc. (SIMO)


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From: Elroy8/31/2022 12:06:04 PM
   of 2620
 
Silicon Motion Securityholders Approve MaxLinear Merger at Extraordinary General Meeting

MaxLinear, Inc. (NASDAQGS: MXL) (“MaxLinear”), a leading provider of radio frequency (RF), analog and mixed-signal integrated circuits, and Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion”), a global leader in NAND flash controllers for solid state storage devices, today announced that at Silicon Motion’s extraordinary general meeting (the “EGM”) of shareholders, held on August 31, 2022, shareholders of Silicon Motion approved the previously announced merger agreement under which MaxLinear will, subject to the terms and conditions thereof, acquire Silicon Motion, and approved other proposals related to the transaction.

More specifically, at the EGM, securityholders of Silicon Motion approved, by the requisite vote, the acquisition of Silicon Motion by MaxLinear, including the approval of: (a) the Agreement and Plan of Merger, dated May 5, 2022 (as it may be amended from time to time, the “Merger Agreement”), by and among MaxLinear, Shark Merger Sub, an exempted company incorporated and existing under the laws of the Cayman Islands and a wholly-owned subsidiary of MaxLinear (“Merger Sub”), and Silicon Motion, pursuant to which Merger Sub will merge with and into Silicon Motion with Silicon Motion continuing as the surviving company and becoming a wholly-owned subsidiary of MaxLinear (the “Merger”); (b) the plan of merger required to be filed with the Registrar of Companies in the Cayman Islands; (c) the Merger itself, on the terms and subject to the conditions set forth in the Merger Agreement; and (d) all other transactions and arrangements contemplated by the Merger Agreement.

The remaining requirements for closure of the transaction are customary closing conditions set forth in the Merger Agreement, including approval from the State Administration for Market Regulation (SAMR) of the People's Republic of China. As previously announced, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired with respect to the proposed acquisition.

------

And so.....we wait.

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From: Elroy8/31/2022 4:42:21 PM
   of 2620
 
New filing by SIMO

The Merger remains subject to review and clearance by the State Administration for Market Regulation (“SAMR”) in the People’s Republic of China. MaxLinear and Silicon Motion filed a simplified filing with SAMR on July 6, 2022. On August 31, 2022, SAMR advised the parties to refile under the normal procedure, which the parties intend to submit to SAMR as promptly as reasonably practicable. MaxLinear and Silicon Motion cannot predict with certainty the length of review under the normal procedure, but expect a final determination by SAMR in the second or third quarter of 2023, or even later.


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To: Elroy who wrote (2586)9/20/2022 12:21:59 PM
From: Madharry
   of 2620
 
SIMO
anythinig new on this deal? i see simo keeps dropping.

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To: Madharry who wrote (2587)9/20/2022 12:40:39 PM
From: Elroy
   of 2620
 
The deal awaits Chinese regulatory approval, which is expected to be received some time in summer 2023.

There is unlikely to be any deal news until then.

There is a huge discount between the SIMO current share price and the SIMO value if the deal goes through. Today SIMO is $70 while the deal value ($93.54 cash + MXL stock) is about $105.

This indicates a significant share of investors think China will (for some reason) reject the deal.

All we can do is wait.

Since SIMO has not updated guidance since January 2022 it's hard to tell how the decline in the consumer semi space is affecting their business. I am sure it is hurting their business, but by how much is anyone's guess.

The good thing is if the deal collapses and it gets announced next summer, by then it seems reasonably likely that the semis will be out of their funk and on the way higher, so SIMO on it's own may be worth $70 regardless of the deal.

However, without any forward guidance it's pretty hard to vaule SIMO.

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To: Elroy who wrote (2588)9/20/2022 12:48:03 PM
From: Madharry
   of 2620
 
what do you think the odds of approval are?

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To: Madharry who wrote (2589)9/20/2022 1:25:46 PM
From: Elroy
   of 2620
 
I don't think any investor or even the companies have a good idea of whether it will receive Chinese regulatory approval, or not.

To my knowledge there is no precedent of a US tech company buying a Taiwanese tech company.

The Chinese regulator that needs to approve the deal is supposed to look at whether the deal will decrease compeition in the industry. It will not.

However, with the US constantly discussing Taiwan recently, and the US constantly banning sales of high end semis and semi capital equipment to China, it's possible that China blocks the sale of a major Taiwanese semi company to the US........just because.

On the other hand, flash controllers are not a key ingredient to national security, and if China blocks this sale then one would imagine the US may block lots of future Chinese acquisitions......just because.

So I have no good idea.

I think the sale will be approved by China, but it's really just a guess.

If the sale doesn't get approved by China, then it likely devalues all the Taiwanese stocks since they're are not free from Chinese control. That could stink.

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From: franklin19/23/2022 2:26:33 PM
1 Recommendation   of 2620
 
Silicon Motion And MaxLinear: Caught In Limbo With A Merger Less Likely

Sep. 23, 2022 1:52 PM ET Silicon Motion Technology Corporation (SIMO) INTC, MU, MXL 1 Comment1 Like

SummaryShareholders gave their blessing, but a merger between SIMO and MXL has nonetheless become less likely due to pushback in China.There are reasons for China to have reservations about the proposed merger, but that does not necessarily mean the merger is dead on arrival.The more time passes without regulatory approval, the less likely it becomes the merger will go through as planned for several reasons.The latest developments are more in favor of a failed merger than a successful one and anyone long SIMO has to take note accordingly.



Bestgreenscreen/iStock via Getty Images

Silicon Motion Technology Corporation (NASDAQ: SIMO), a supplier of NAND controller chips, received some good news and some bad news. SIMO shareholders approved of the proposed merger with MaxLinear ( MXL), bringing the proposal one step closer to reality by removing a key hurdle. However, the good news was almost immediately offset by bad news out of China. The gap between the proposed acquisition price and the actual stock price got even bigger as a result. Why will be covered next.

The market is increasingly losing faith in a successful mergerThe chart below shows how the stock surged higher on May 5 when SIMO and MXL proposed a merger with the latter acquiring the former in a cash and stock transaction valued at $3.8B or $114.34 per ADS. Every SIMO shareholder will get 0.388 share of MXL stock for each ADS, plus $93.54 in cash.

Source: finviz.com

However, the chart shows something else. The gap between the proposed acquisition price and the actual stock price has steadily gotten wider, which suggests the market is increasingly skeptical the merger will go through as proposed. As a consequence, valuations for SIMO have dropped as shown in the table below and are now way below where they are supposed to be according to the agreement. The stock is at around $70, the lowest price point since the merger was announced, having lost 26% YTD.

SIMO

MXL

Market cap

$2.43B

$2.74B

Enterprise value

$2.25B

$2.79B

Revenue (“ttm”)

$1,012.9M

$1,021.6M

EBITDA

$290.9M

$224.3M

Trailing P/E

10.81

27.03

Forward P/E

9.89

18.71

P/S

2.37

2.60

P/B

3.60

4.74

EV/sales

2.22

2.73

Trailing EV/EBITDA

7.73

12.44

Forward EV/EBITDA

7.00

6.96

Source: SeekingAlpha

There was some good news on August 31 when SIMO shareholders voted to approve of the merger with MXL, but the stock still sold off after both companies announced that China requested they refile their application for regulatory approval using the normal procedure, in effect denying their earlier request to fast track approval using a simplified filing on July 6.

SIMO and MXL hoped to complete their merger in the first half of 2023 and they still expect a final determination from China in the second or third quarter of 2023, but the latest decision from China puts the merger in limbo since regulators in China are under no time limits to come to a verdict on the proposed merger. China could do what it did in the case of the failed acquisition of Kokusai Electric by Applied Materials ( AMAT), which is to let time pass by sitting on its hands and stonewalling, not giving approval, but not rejecting anything either.

Why time is against the proposed merger between MXL and SIMOThe merger can technically still go through as China has not officially rejected it, but the latest developments should come as music in the ears of those who are against the merger for whatever reason. At the very least, the transaction will need more time to complete than if China had approved of the use of the faster procedure.

This could turn out to be problematic. The more time it takes to finish the transaction, the more likely it is to encounter a problem. The delay may even turn out to be death knell for the proposed merger for reasons that SIMO and MXL have no control over. For starters, while the semiconductor market is growing, it is also slowing down. Recent industry forecasts predict growth in the semiconductor market will decelerate from 26.2% in 2021 to 13.9% in 2022 and only 4.6% in 2023. Semis should be concerned by the fact that demand is faltering.

Furthermore, weakening demand is even more pronounced in certain market segments, especially as it relates to PC and smartphone demand. Various companies like Intel ( INTC), Micron ( MU) and Samsung ( OTCPK:SSNLF) have made this clear in their latest earnings outlook. This is especially problematic for a company like SIMO since it is heavily exposed to the PC and smartphone market. In fact, MU and INTC are SIMO’s biggest customers according to the most recent Form 20-F.

This slowdown, including at key customers, means the quarterly numbers are likely to get worse for SIMO in the near term as time goes by. It is therefore important for SIMO that the merger is completed as soon as possible as time is not on its side. China taking its time to move forward does not help in this regard.

(GAAP)

Q2 FY2022

Q1 FY2022

Q2 FY2021

QoQ

YoY

Revenue

$252.373M

$241.978M

$221.103M

4.30%

14.14%

Gross margin

52.9%

52.1%

50.3%

80bps

260bps

Operating margin

26.6%

27.4%

27.3%

(80bps)

(70bps)

Operating income

$67.115M

$66.362M

$60.438M

1.13%

11.05%

Net income

$51.583M

$54.502M

$49.545M

(5.36%)

4.11%

EPADS

$1.55

$1.60

$1.42

(3.12%)

9.15%

(Non-GAAP)

Revenue

$252.373M

$241.978M

$221.103M

4.30%

14.14%

Gross margin

53.0%

52.2%

51.0%

80bps

200bps

Operating margin

30.5%

29.8%

29.2%

70bps

130bps

Operating income

$76.957M

$72.032M

$64.481M

6.84%

19.35%

Net income

$62.754M

$58.945M

$52.730M

6.46%

19.01%

EPADS

$1.88

$1.72

$1.50

9.30%

25.33%

Source: SIMO Form 6-K

Why MXL could be forced to walk away from SIMOKeep in mind that MXL made its offer, which valued SIMO at $3.8B, at a time when earnings numbers greatly benefited from the semiconductor boom of the last few years. The quarterly numbers still show healthy growth as shown above, but the pace of growth has come down compared to say last year. The balance sheet has also taken a hit from SIMO spending its cash on dividends and stock buybacks. Furthermore, the numbers are highly likely to get worse for SIMO, which means SIMO would do well to complete the merger while the going is still relatively good.

Remember that while SIMO has done well recently, it was not always like this. There have been plenty of times when SIMO struggled. The numbers from the last couple of years are more like an anomaly than business as usual. A trip back in history shows that recent quarterly numbers are atypical. For instance, revenue has grown at a CAGR of 30.5% in the last three years, but this goes down to 14.5% in the last ten years. Similarly, EBITDA has grown at a CAGR of 17.2% in the last ten years, but much faster at 49.9% in the last three years. SIMO is still benefiting from being on an upswing, but for how much longer remains to be seen.

This is why SIMO needs to close the deal as quickly as possible. If the numbers get worse for SIMO, SIMO becomes less attractive to MXL, especially at the proposed acquisition price. MXL may even feel that it is overpaying for an asset that is losing value with the semiconductor market heading for a slump and earnings likely to drop as a result.

Note that the market for NAND controller chips is fairly crowded with many players, which suggests very stiff competition in a downturn with everyone fighting for market share, making it extra hard for everyone to stay out of the red. SIMO should not expect to receive the same valuations it got during the boom years if earnings are much less in a downturn.

In addition, MXL will use mostly debt to finance the SIMO acquisition, but this could become problematic as time goes by. Interest rates, for example, are going up due to Fed policies, which are designed to make debt and leveraging yourself more costly. The longer MXL has to wait to issue debt, the higher the interest rate is likely to be. MXL may have to decide whether leveraging yourself shortly before a possible recession is such a wise move or if it could backfire on the company.

MXL has stated that it took a potential downturn into account when it decided to acquire SIMO, but it’s worth asking if MXL will still feel that way if or when the semiconductor market and the overall business environment deteriorates, certainly in comparison to earlier in the year when the deal was contemplated. If the semiconductor market goes into a deep slump, there may even come a point at which time it makes more business sense for MXL to walk away rather than complete the transaction as proposed.

Investor takeawaysA previous article concluded that the proposed merger between SIMO and MXL would face its greatest challenge in China. This has turned out to be the correct assessment with the proposed merger gaining U.S. antitrust approval and the subsequent approval by SIMO shareholders. It now comes down to regulatory approval from China if the merger is to go ahead.

However, while China has yet to make a final determination, its refusal to fast track approval and the timing of the decision suggest a fair amount of reservations on the part of China. It should be noted that the proposed merger comes at a time when the U.S. and China are effectively in a struggle as to who controls what in the semiconductor market.

The U.S. government has, for instance, recently decided to deny Chinese companies access to certain high-end GPUs from Nvidia ( NVDA), the latest in a long list of moves targeted at China. Moves like this are likely to make the Chinese government cognizant of the fact that giving approval to the merger may not be in the best interest of its companies. China is also likely to remember how the U.S. government has blocked numerous potential acquisitions by Chinese entities, including fairly insignificant ones like the one for Magnachip Semiconductor ( MX). It may be better for China if SIMO remains an independent company when viewed from this perspective.

On the other hand, a merger is still possible. SIMO is arguably in the lead for NAND controllers technology-wise, but there are alternative suppliers in the market, including from within China. So China is not obliged to block the merger. China could give regulatory approval under the right conditions if China can leverage it into something else. This suggests that while the likelihood of a merger has become smaller, it is not zero either.

Still, while I will hold on to SIMO, I would not be a buyer either. It’s worth holding on to SIMO since a merger is still possible, provided exposure is not too great, but to be a buyer means potentially risking a significant loss if the merger fails in the end. True, the stock trades at a hefty discount to the proposed acquisition price, but that’s because the likelihood of an aborted merger is fairly high.

Anyone who gets in at this point stands to profit if the merger does end up going through as proposed. On the other hand, the proposed merger has helped keep SIMO’s stock afloat in what has been a tough year for stocks, semis in particular. SIMO has not sold off as much as most semis, but if the merger fails for whatever reason, the stock will lose the support it got from the proposal and it is likely to sell off as a result.

Bottom line, the odds the merger goes through has gotten smaller. The proposal is still alive, but China’s decision, increased U.S.-China disputes regarding semiconductors and other recent developments suggesting the semiconductor industry is heading for a downturn have stacked the odds against the merger.

If the odds were 50/50 for a successful merger when the proposal was first made, then it may now be more like 1 in 3 with recent developments. The odds are likely to keep dropping the longer it takes to complete the merger the way things stand, which make it increasingly harder to justify a continued pursuit of a merger between SIMO and MXL as proposed. The proposed merger is still out there, just don’t bet it all on it happening.

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From: Elroy9/27/2022 1:46:39 PM
   of 2620
 
If the MXL deal closed today, SIMO would go up 57%.

I guess that means most investors think the deal will not go through.

It seems we won't know the answer to whether the deal will go through or not for probably 8-16 months.

If the deal was called off today, I wonder where SIMO's share price would go? I don't really know, since it's hard to tell what's going on with SIMO as they haven't given forward guidance since January 2022.

Since the dividend likely doesn't get paid again until the deal result is announced, SIMO's probably going to generate and keep a decent amount of cash ($70m per year saved by not paying a dividend). Also in 2023 they will likely finish building their new headquarters, and the "sale and leaseback" which follows will also generate a significant amount of cash. I don't know if a sale and leaseback applies to just the building (~$75m) or the land and building (~$130m). Either way, it's a healthy cash infusion.

Ho hum, waiting a year is sorta tedious, and we're not going to know if it's a good idea until the outcome is known (deal or no deal). SIMO has probably held up better than a lot of semiconductor stocks depending on what date you start measuring. And the SIMO valuation now off of reasonable 2023 EPS Is probably below 10x, maybe even as low as 7x or 8x ex-cash. That's cheap, but with the consumer (PC, cell phone, low level electronics) focus I doubt SIMO ever gets a decent PE.

Best possible outcome for SIMO shareholders is the market continues to crash badly for another year, and then the deal goes through! We'd get a cash infusion when other tech stocks are also super cheap. Lets see what happens.....

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From: franklin110/5/2022 8:08:23 AM
   of 2620
 
Silicon Motion rises as Susquehanna upgrades, citing 'attractive risk-reward profile'

Oct. 05, 2022 8:04 AM ET Silicon Motion Technology Corporation (SIMO), MXLBy: Chris Ciaccia, SA News Editor

Bestgreenscreen/iStock via Getty Images

Silicon Motion Technology (NASDAQ: SIMO) shares rose on Wednesday as investment firm Susquehanna upgraded the NAND flash supplier, noting the stock has an "attractive risk-reward profile" at these levels.

Analyst Mehdi Hosseini moved his rating on Silicon Motion Technology ( SIMO) shares to positive from neutral, along with a $108 price target, noting that the MaxLinear (NASDAQ: MXL) acquisition is still pending and if it closes, expected by mid-2023, there is considerable upside.

Hosseini added that while smartphone and notebook shipments are expected to fall in 2023, the mix and average selling price should rise, and help Silicon Motion Technology ( SIMO) generate "flattish" revenue next year. When combined with operating margin contraction that could lower earnings per share to $6.62, a $160M breakup fee, putting an 8 earnings multiple would equal a $57 stock. But if the deal closes, shares could be worth as much as $108.

"We have no insight into the China approval process, which is the lengthiest," Hosseini wrote of the pending deal. "But we argue that the shares now offer an attractive risk/reward profile, especially in an uncertain demand environment."

In August, MaxLinear ( MXL) was asked by China's antitrust regulatory to refile for its planned $3.8B purchase of Silicon Motion ( SIMO) under "normal procedure."

Silicon Motion Technology ( SIMO) shares gained nearly 1% to $69.80 in premarket trading.

The MaxLinear ( MXL)- Silicon Motion ( SIMO) deal was announced in May and received U.S. antitrust approval for the transaction in late June as the waiting period under the Hart-Scott-Rodino Antitrust Act expired.

Separately in August, Silicon Motion ( SIMO) shareholders approved the acquisition.

Analysts are mostly bullish on Silicon Motion Technology ( SIMO). It has a STRONG BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates SIMO a HOLD.

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From: Elroy10/12/2022 1:17:44 PM
   of 2620
 
Well damn, SIMO is trading at about $56 despite an acquisition deal to be acquired by MXL for about $105.

SIMO is probably not a bad investment at $56 even if there is no deal, but right now with the tech and semi market declines, there are lots of stocks that are attractively valued, so it's hard to make the case one should buy SIMO rather than QCOM......or MCHP....or ADI.

Interesting.

The MXL-SIMO acquisition is waiting on Chinese regulatory approval. That approval could come anytime befween March and December next year, or China's answer could be "no, we don't approve". That deal rejection would be difficult to justify based on historical norms. If China let ADI buy huge analog semi peers MXIM and LLTC, why would they reject MXL's effort to buy little low tech boring SIMO?

Ho hum, and so, we wait.......

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