Shares of Sigmatel Inc. (NASDAQ: SGTL) are surging some 59% to $2.85 pre-market today. Freescale is paying $110 million, or $3.00 per share in cash, to acquire the small integrated circuits designer.
Interestingly enough, this was one of the old iPod-beneficiary stocks and if you look at a chart from 2004 you will see it had a great move from 2004 to 2005. If you look at the long-term chart you will see that shares traded over $40.00 back then, and now here we are at $1.79 Friday and a $3.00 buyout this morning.
Now Freescale looks like it is making a bottom fishing acquisition. Frankly, investors should expect a "blocking the buyout lawsuit" because this is going to act as a "Locking In Your Losses" buyout and it isn't even going to compensate all holders that got in over the last year. You cannot blame Freescale for being an opportunist, but the board of Sigmatel is hosing most of its shareholders. Obviously they are worried about the company having any relevance, but this is perhaps one of the more egregious merger acceptances seen by a board of directors.
The good news is that this may be a floor-buyout because there is a 30 day "go-shop" provision in place through March 4, 2008. The buyout is also subject to shareholder approval, and you could imagine there are many holders who will vote against this. If the merger happens, it is expected to close in the second quarter of this year.
Many mergers and buyouts are strange, and sometimes boards of directors are under question as to why they would sell at a certain price. But this merger is just outright freaky.
Jon C. Ogg is an editor of 247WallSt.com.
Sigmatel's buyout . . . just plain weird
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