Dialog Semiconductor to acquire Adesto to expand industrial IoT deployment

Add differentiated cloud connectivity solutions to advance adoption in the Industry 4.0 space;

Diversify customer groups and increase industrial sales channels;

The acquisition is expected to be EPS accretive in the first calendar year following closing;

Cost synergies of approximately $20 million per year are expected to be achieved on top of significant revenue synergies.

Dialog Semiconductor plc, a leading provider of highly integrated power management, charging, AC/DC power conversion, Wi-Fi and Bluetooth low energy technologies, and Adesto Technologies Corporation (“Adesto”), a leading provider of innovative custom integrated circuits (ICs) and embedded systems for the Industrial Internet of Things (IIoT) market, today announced that they have signed a definitive agreement for Dialog to acquire all outstanding shares of Adesto.

The acquisition of Adesto will accelerate Dialog's expansion into the growing IIoT market, help smart buildings and industrial automation (Industry 4.0), and seamlessly promote cloud connectivity. Adesto is headquartered in Santa Clara, California, with approximately 270 employees. Its mature portfolio of industrial solutions for smart building automation is a very good complement to Dialog's manufacturing automation portfolio. Adesto's solutions are sold in the industrial, consumer, medical and communications markets.

Dr. Jalal Bagherli, CEO of Dialog Semiconductor, said: “This acquisition will sustainably enhance our position in the Industrial Internet of Things market. Adesto’s strong capabilities in connectivity solutions and highly optimized products for building and industrial automation perfectly complement and expand our Industrial Internet of Things portfolio from our recent acquisition of Creative Chips. Adesto’s deep customer relationships, comprehensive system technology expertise and proprietary technologies will bring even greater value to Dialog’s customers.”

“By combining the best-in-class technologies of Dialog and Adesto, we will create unique IIoT solutions for today’s increasingly connected world,” said Narbeh Derhacobian, CEO of Adesto. “We are very excited to join Dialog and bring even more value to our combined customer base.”

Advantages of the Acquisition

Bringing Dialog and Adesto together brings complementary product portfolios and enables cross-selling to a broad customer base serving growing applications in the industrial market.

Combination of the two companies:

The deal will expand Dialog’s IIoT capabilities by combining industrial connectivity, smart metering and building automation solutions to reach more than 5,000 customer companies, most of which are new to Dialog.

Dialog's wireless product portfolio (BLE, Wi-Fi) will complement Adesto's industrial wired connectivity product portfolio to better serve smart buildings and industrial applications. Cloud connectivity will further differentiate Dialog's existing industrial solutions.

By combining Adesto’s low-power application-specific memory products with Dialog’s BLE and Wi-Fi wireless connectivity technologies and True Wireless Stereo (TWS) audio ICs, a complete system solution is created for wearables, hearables and other IoT applications.

By leveraging Dialog’s proven automotive-grade production and test processes, Adesto’s specialized memory products will unlock future growth in the automotive market and in the emerging, fast-growing field of artificial intelligence (AI).

It adds engineering capabilities and design scale to Dialog, further expanding Dialog's existing custom IC business and making Dialog one of the largest custom analog mixed-signal semiconductor suppliers.

Transaction Structure and Terms

Dialog will acquire all outstanding shares of Adesto for $12.55 per share in cash, representing an enterprise value of approximately $500 million. The acquisition will be funded from Dialog's balance sheet.

After the completion of the acquisition, it is expected to be accretive to Dialog's earnings per share (EPS) in the first calendar year. And in the first calendar year after the completion of the acquisition, Dialog expects to achieve approximately $20 million in annual cost synergies in the combined company. Based on the complementary product portfolios and technologies of the two companies, Dialog expects to have considerable additional revenue synergies. Adesto expects revenue of approximately $118 million in fiscal 2019 and expects to continue to grow revenue in the next few years.

The transaction is expected to close in the third quarter of 2020, subject to regulatory approvals and customary closing conditions.

Adesto's Board of Directors has unanimously approved the transaction and recommends that Adesto's stockholders vote in favor of the transaction, and Adesto's directors and executive management have agreed to vote in favor of the transaction.

Hogan Lovells served as Dialog’s legal advisor and BMO Capital Markets served as its financial advisor. Fenwick & West LLP served as Adesto’s legal advisor and Cowen & Company, LLC served as its financial advisor.