Luxembourg-based microchip company Magnachip Semiconductor (NYSE:MX) is up nearly 20% so far this morning on rumors of mounting takeover interest. Indeed, MX stock is rising on reports that South Korea’s LX Group is pursuing acquisition of the company.
What else do you need to know about this Magnachip news today?
Well, as per a Korea Economic Daily report, LX group is predicted to release a letter of intent for the acquisition of Magnachip as early as next week. Current estimates value Magnachip around 1 trillion won, or $794 million.
The news comes hot off reports last week that Magnachip’s negotiations with Kolon Group broke down. The South Korean manufacturing company apparently backed out of talks with Magnachip over price.
Magnachip has clearly been the subject of tremendous acquisition interest of late.
MX Stock Rises as Acquisition Rumors Gain Traction
Today’s news comes hot off a slew of acquisition news on Magnachip. In January, Korean-based media outlet TheBell reported that JPMorgan (NYSE:JPM) was reaching out to parties interested in acquiring Magnachip. This was shortly after Magnachip mutually terminated its deal with then-buyer Wise Road this past December. The companies each announced withdrawing the deal after failing to obtain regulatory approval. The Committee on Foreign Investment in the United States noted a number of potential security risks present in the sale to Wise Road.
Since then, several companies, including Kolon and LX, have come out of the woodwork to express their interest in purchasing the company.
However, Magnachip is on something of a deadline. The company adopted a “poison pill” this past winter set to expire in December. A poison pill refers to a defense tactic used to block a hostile takeover. In this case, the poison pill is a limited-duration shareholder rights plan, exercisable if any group or person acquires more than 12.5% of the company’s available stock. The shareholder rights plan would likely function by offering substantially discounted stock to existing shareholders. This would consequently dilute the overtaker’s holding in the company and deter further takeover efforts.
Magnachip is clearly a company in flux. Whether the chip maker comes to an agreement prior to its poison pill expiration remains to be seen.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
