AMS Ends Talks With Dialog to Create $4.5 Billion Chipmaker

Jul 22, 2014 3:34 am ET

(Updates with analyst’s comment in fourth paragraph.)

July 22 (Bloomberg) -- AMS AG ended talks to acquire Dialog Semiconductor Plc in a combination that would have created a European specialist in smartphone chips valued at $4.5 billion.

The companies couldn’t agree on the terms of a transaction, Kirchheim, Germany-based Dialog said today. Dialog shares, which have dropped more than 5 percent since the companies said last month they were in talks, rose 1 percent to 23.04 euros at 9:30 a.m. in Frankfurt. AMS had to announce its intention to bid by July 24.

A deal would have allowed the companies, both of which supply chips for Apple Inc.’s iPhone and iPad, to pool resources and reduce their dependence on Apple as smartphone demand rises. AMS makes chips used to adjust brightness and colors on displays, while Dialog focuses on semiconductors that reduce power consumption.

“We believe the reason for the termination of merger talks is mainly due to a different view on valuation,” Harald Schnitzer, an analyst at DZ Bank AG in Frankfurt, said in a note. “Dialog seems to see itself more valuable compared to AMS since its expected growth rates are quite high.”

Dialog is also more flexible than AMS since it doesn’t own production facilities, Schnitzer said.

Apple accounts for about 80 percent of Dialog’s revenue, and for 23 percent of sales at Unterpremstaetten, Austria-based AMS, data compiled by Bloomberg show. The revenue share would be 61 percent for a combined company.

Bid Restrictions

AMS won’t be able to make an offer for six months under U.K. takeover rules, the Austrian company said in a separate statement. The restrictions can be waived if there’s a major change in Dialog’s business or if the board consents to merger talks.

AMS shares traded 0.1 percent higher at 142.6 Swiss francs in Zurich trading.

Dialog is “very comfortable about its existing position and prospects as a standalone company,” Jose Cano, the company’s head of investor relations, said by phone. “We have always been very open concerning combinations and will remain so.”