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Renesas to buy IDT for $49 per share & FIT updates +6

07:08 11-Sep-18


The 8-K filed by IDT provides a few more relevant details, with the main one being that if either company fails to execute the terms of the merger, it owes the other a $166.4M break-up fee.  The initial deadline is June 10, 2019, but that is subject to two 3-month extensions, if required for regulatory approval.

The break-up fee equates to just under $1.29 per IDTI share.  It would be invoked if IDT were to accept a superior offer, implying that the minimum bid in such an offer would have to exceed $50.30 per share.  Of course, Renesas is responsible for getting the necessary regulatory clearances, and would be on the hook should it fail to do so.  Based on prior IDTI pricing, this could be considered to indicate a $40 floor should such trouble surface, but I would have some doubts.  As noted in both of yesterday's updates, tariffs and regulatory trouble combined might start to devalue American companies and we're already seeing initial evidence of such an effect.

On 09/11/2018 03:58 AM, Esekla wrote:

As expected, Renesas has announced an agreement to buy Integrated Device Technology for $49 per share.  Closing of the transaction is expected to occur in the first half of 2019, following approvals by IDT shareholders and the relevant regulatory authorities.

That last phrase represents the main danger in holding IDTI shares going forward.  Nonetheless, I expect to see trading in them gravitate toward the high forties over the pre-market session, which starts in a few minutes.  We haven't seen confirmation from IDT's side yet, but my opinion is that this is best for the company and its shareholders, especially in light of competition and consolidation in the chip space.  Let those links stand as follow-up to everything I've already said about Fitbit.  For IDT, it's always possible that competing offers could emerge, but increased attention brings increased risk.  Thus, I think both parties will do everything they can to have this deal go through. 

Assuming that happens, the IDTI section of the website will eventually go public, but there is no hurry on that.  It will continue to be updated, and perhaps we will get an INVN-style pre-closing opportunity.  In fact, the CQH section has been reverted to private for now.