Skyworks Is Buying a Chip Unit From Silicon Labs. Here’s What It Means for the Stock.

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Semiconductor maker

Skyworks Solutions

said late Thursday that it had struck a deal to acquire

Silicon Laboratories

‘ infrastructure and automotive business for $2.75 billion in cash.

Skyworks stock (ticker: SWKS) climbed 4.1%, to $191.01, in the extended session Thursday, as Silicon Labs (SLAB) shares surged 12.4%, to $162.51. In addition to the asset sale, Silicon Labs said Thursday that it planned to return $2 billion of the deal’s proceeds to shareholders through some combination of stock buybacks and special dividends.

Skyworks said the acquisition includes Silicon Labs’ power isolation, timing, and broadcast products and technology. Once closed, the new unit will help Skyworks expand into markets such as electric and hybrid vehicles, 5G wireless infrastructure, and data centers. It will also immediately increase the company’s revenue.

“By leveraging our global sales channels, operational scale, and deep customer relationships, Skyworks is well positioned to drive above-market growth, while diversifying revenues, expanding margins, and delivering strong returns in earnings and cash generation,” Skyworks CEO
Liam Griffin

Once the acquisition is complete, Skyworks will generate more than $5 billion in annual revenue, Griffin said in a conference call late Thursday. Chief Financial Officer
Kris Sennesael
said that the infrastructure and automotive business brought in revenue of about $375 million in 2020, and is on track to hit $400 million this year.

As part of the deal, Skyworks will hire Mark Thompson, currently a Silicon Labs vice president and general manager of the infrastructure and automotive unit. He will report directly to Griffin. About 350 other Silicon Labs employees are expected to join Skyworks.

The deal, which Skyworks said it expects to close in the third quarter, is the company’s largest acquisition to date. As part of the acquisition, Skyworks reached an agreement with

JPMorgan Chase

to provide a debt financing bridge of up to $2.5 billion.

Sennesael said that Skyworks would have $1 billion in cash on the balance sheet after the deal closes.

Silicon Labs stock closed the regular session down 2.2%, at $144.65. Skyworks shares retreated 1.7%, to $183.42.

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