Two High-Tech Plays Announce Merger, Spiking Massive Gains

Jacob Harper  |

On Feb 24 two multi-billion dollar semiconductor manufacturers announced they would be joining forces, creating a single company that will serve the biggest mobile phone makers in the world. The new venture will rank among the world’s largest in the sector by market cap, and is expected to ring in approximately $2 billion a year in revenues.

Oregon-based TriQuint Semiconductor (TQNT) will merge with their rival, RF Micro Devices (RFMD) , who are located in North Carolina. On the news of the merger, shares of both companies rose dramatically.

The merger will save a $150 million via savings stemming from a newfound lack of competition. Both companies supplied chips to Apple Inc. (AAPL) , BlackBerry (BBRY) and Samsung for their various smartphone products.

Though both companies had their own strengths when it came to particular clients. Northland Securities analyst Tom Sepenzis noted that "TriQuint is a very big supplier to Apple,” specifically radio frequency chips, while “RFMD's got a better relationship with Samsung” stemming from their mobile broadband chip product. With the union of the two companies, the new entity will presumably gain both advantageous relationships while mitigating costs.

While this new semiconductor manufacturer looks to assert a major position in the semiconductor market, the vast majority of smartphone business still goes to a much larger competitor. Taiwan Semiconductor ($TSM) is Apple’s number one semiconductor supplier, and the company produces the A8 processors essential for iPhones and iPads. And at a $90 billion market cap, Taiwan Semiconductor roughly 30 times larger than the result of the TriQuint/RFMD merger.

On the news of the merger, both stocks popped. Near the end of the trading day TriQuint had shot up 26.38 percent to hit $11.66 a share, while RFMD notched a 20.77 percent gain to hit $7.02 a share. The newly formed entity does not have a nameas of yet. Current stockholders in both companies will have a 50/50 split of the new venture.

 

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Companies

Symbol Name Price Change % Volume
TSM Taiwan Semiconductor Manufacturing Company Ltd. 36.64 -0.69 -1.85 3,895,481 Trade
BBRY BB BlackBerry Limited n/a n/a n/a n/a
ASFX American Scientfc Res 0.00 0.00 40.00 10,000
AAPL Apple Inc. 166.17 -4.78 -2.80 27,457,297 Trade

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