Microsemi Announces Definitive Agreement to Divest Business to Mercury Systems, Inc.

- Company Focusing on Core Strategic Solutions, Continuing Move Toward Higher Value IC and SoC Offerings

- Improves Company's Overall Profitability Metrics and Growth Profile

 

ALISO VIEJO, Calif., March 23, 2016  -- Microsemi Corporation (MSCC), a leading provider of semiconductor solutions differentiated by power, security, reliability and performance, today announced it has entered into a definitive agreement to divest a non-strategic component of a board level systems and packaging business to Mercury Systems, Inc. (MRCY), for $300 million in cash (subject to a customary purchase price adjustment).

 

"This carve out is advantageous to Microsemi both strategically and financially," said James J. Peterson, chairman and CEO of Microsemi. "It allows the company to intensify its focus and frees up investment capital for the ongoing development of proprietary, higher-value solutions for our aerospace & defense, communications, industrial and storage end markets. The resulting business model will be more profitable with better growth opportunities and, importantly, all proceeds from this sale will be used to retire debt associated with the recent acquisition of PMC-Sierra."

Microsemi's board of directors has approved the transaction, which remains subject to regulatory approvals and customary closing conditions. The deal is expected to close during Microsemi's third fiscal quarter of 2016, ending July 3. Microsemi will discuss the transaction in further detail during its upcoming second fiscal quarter conference call, currently targeted for April 28, 2016.

 

The proceeds from the divested business, along with an incremental $100 million from available cash, will enable the company to reduce the debt to EBITDA ratio significantly ahead of schedule as announced at the close of the acquisition.

 

Microsemi also reaffirms its fiscal second quarter guidance included in its fiscal first quarter earnings release issued on Jan. 25, 2016.

 

About Microsemi

Microsemi Corporation (MSCC) offers a comprehensive portfolio of semiconductor and system solutions for communications, defense & security, aerospace and industrial markets. Products include high-performance and radiation-hardened analog mixed-signal integrated circuits, FPGAs, SoCs and ASICs; power management products; timing and synchronization devices and precise time solutions, setting the world's standard for time; voice processing devices; RF solutions; discrete components; enterprise storage and communication solutions, security technologies and scalable anti-tamper products; Ethernet solutions; Power-over-Ethernet ICs and midspans; as well as custom design capabilities and services. Microsemi is headquartered in Aliso Viejo, Calif., and has approximately 4,800 employees globally. Learn more at www.microsemi.com.

 

Microsemi and the Microsemi logo are registered trademarks or service marks of Microsemi Corporation and/or its affiliates. Third-party trademarks and service marks mentioned herein are the property of their respective owners.

 

 

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements based on current expectations or beliefs, as well as a number of assumptions about future events, and these statements are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The reader is cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of uncertainties and other factors, many of which are outside the control of Microsemi . The forward-looking statements in this release address a variety of subjects including, for example, the expected date of closing of the divestiture, the potential benefits of the divestiture, including an expected increase in profitability and accelerated retirement of debt, Microsemi's revenue and earnings guidance, and any other statements of belief or about Microsemi's plans, beliefs or expectations. The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: costs associated with the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the definitive agreement; the possibility that various conditions to the consummation of the divestiture may not be satisfied or waived, including the receipt of required regulatory clearances; the risk that the divestiture will not close within the anticipated time period; risks related to the ultimate outcome and results of divesting the relevant operations, the ultimate outcome of Microsemi's operating strategy applied to the remaining operations and the ultimate ability to realize expected efficiencies and growth opportunities; risks that the proposed transaction disrupts current plans and operations, and potential difficulties in employee retention as a result of the divestiture; risks related to Microsemi's ability to successfully implement its overall acquisition strategy or integrate other acquired companies; uncertainty as to the future profitability of businesses acquired by Microsemi, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions by Microsemi; risks related to Microsemi's reliance on government contracts for a significant portion of its sales, including impacts of any termination or renegotiation of such contracts, uncertainties of governmental appropriations and national defense policies and priorities and effects of any past or future government shutdowns; the risk of downturns in the highly cyclical semiconductor industry; the effects of local and national economic, credit and capital market conditions on the economy in general, and other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the U.S. Securities and Exchange Commission ("SEC"), including, but not limited to, those detailed in Microsemi's Annual Report on Form 10-K for the year ended September 27, 2015 and all subsequent Form 10-Q reports filed by Microsemi with the SEC. The forward-looking statements contained herein are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Guidance is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of certain items that have been excluded from the forward-looking non-GAAP measures, and a reconciliation to the comparable GAAP guidance has not been provided because certain factors that are materially significant to Microsemi's ability to estimate the excluded items are not accessible or estimable on a forward-looking basis.