SIMTEK Corporation (NDAQ: SMTK) shares continued their rise today after Cypress Semiconductor
(NYSE: CY) announced that it would explore a potential acquisition of
the company. Cypress offered few details other than noting that
discussions could result in a transaction such as a merger, acquisition
or stock, or purchase of a division or business. SIMTEK shares jumped
over 60% on the news, despite the fact that there has been no set offer
or assurances that a deal will even be made in this difficult credit
environment. So, what should you do?
SIMTEK shares are trading well off their 52-week highs of around
$6.71 after the company cut its revenue and profit forecasts in late
October. Shares are now trading at a five year low and Cypress already
owns a 6% stake in the company with warrants that could boost its
interest to 19.3% if exercised. Cypress also stands to save money on
royalty payments to SIMTEK related to their co-developed 4-megabit chip
scheduled for delivery next quarter. Combined, these factors could make
for a relatively cheap acquisition in terms of cash outlay at this
point.
SIMTEK chief executive Harold Blomquist said his company had no
warning that Cypress was interested in an acquisition but was not
surprised given their very healthy working relationship. Many analysts
are not all that surprised either given the fact that the two companies
are joint development partners and suggest that the company could sell
for between $3.15 and $3.50 per share. Given the health of the credit
market and the fact that this is a strategic buyer, it is unlikely that
any other bidders will emerge.
In the end, this is great news for SIMTEK shareholders who saw their
shares hit new five year lows just days ago. Cypress’ acquisition would
make a lot of sense from a business standpoint and would come at a very
cheap price while SIMTEK shareholders would be rewarded with a fair
value for their stock. Combined, these factors make SMTK worth watching!
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