Dialog Semiconductor to buy Silego to expand into Internet of Things

FRANKFURT (Reuters) - Germany’s Dialog Semiconductor is to acquire California-based Silego Technology Inc for up to $306 million, helping to strengthen its position in the market for the so-called Internet of Things.

Dialog’s business is largely focused on power management chips used in mobile phones by companies like Apple. Seeking to reduce that dependence, it wants to diversify into automotive and industrial areas and the Internet of Things -- which connects everyday items such as refrigerators, TVs and cars, via the internet.

Silego is a leading maker of configurable mixed-signal integrated circuits, or CMICs, which integrate multiple functions into a single chip that can be customized to perform different functions.

Dialog, announcing the deal on Thursday, said it would pay $276 million in cash plus an additional contingent consideration of up to $30.4 million for privately owned Silego, which has 235 employees and expected sales this year of $80 million.

The contingent element will depend on Silego hitting revenue targets over the next 15 months, Dialog CEO Jalal Bagherli said on a conference call.

While Dialog and Silego share several major customers, the deal will expand Dialog’s customer base to include Dell, Fitbit, Garmin, GoPro and Synapse, among others and expand Dialog’s reach into China, according to a Dialog slideshow presentation posted on its web site.

The deal would expand Dialog’s potential market by more than $1.4 billion, and the company said it expected the transaction to be accretive to its earnings per share in 2018 and accretive to gross margins.

Dialog has attempted larger merger deals previously, including a $4.6 billion agreement to acquire Atmel, but they fell apart before completion.

The Silego deal, which has been approved by the boards of both companies, is expected to be completed in the fourth quarter of this year, Dialog said.

Management told the conference call that Dialog would continue its existing program of share buybacks and announce the details of a further tranche in due course.

Dialog in June completed the buyback of 1.7 million shares under the third tranche of its buyback program. Its shares were flat at 38.39 euros in Frankfurt at 1000 GMT.