In early research reports, I predicted that if the management team at Resonant Inc. (RESN) “continues to execute, I believe an acquisition is virtually guaranteed.”
And I pegged the $46 billion RF chip manufacturer Murata Manufacturing Co., Ltd. (MRAAY) as the most likely acquirer, based on the overlapping expertise in SAW filter technology and then subsequently, the strategic partnership that emerged between the two companies.
Well, that prediction came true yesterday!
After the bell, Murata announced it’s acquiring Resonant for $297.5 million or $4.50 per share in cash.
That’s a staggering 262% premium to the stock’s closing price.
Why pay so much? Because Resonant’s technology and patent portfolio are worth it.
In fact, I originally estimated the company’s leading 5G filter design technology and expanding IP library, which now stands at over 400 patents, would fetch upwards of $350 million, based on comps in the space.
Forgive me for being off by about $50 million.
In all seriousness, the acquisition came a little bit later than expected, which resulted in additional dilution. Hence, the lower share price than originally predicted.
But it happened, nonetheless. And in this tough market, I’m sure no one is going to complain about pocketing a healthy double- or triple-digit gain, depending on your original entry.
I’m certainly not.
Getting back to the staggering takeover premium Murata is paying…
Rest assured, the significance extends beyond this deal.
How so? Well, it underscores how oversold and cheap so many small- and micro-cap stocks have become in the recent downturn.
After all, there’s no way Murata would pay up so much unless it knew it was getting an absolute bargain. And that bodes well for any other small- and micro-caps stocks we own with disruptive technologies and dominant patent portfolios.
So while pocketing solid gains in an individual stock is never a bad thing, the potential implications for our other holdings should not be overlooked.
In fact, I wouldn’t be surprised one bit if unsolicited takeover offers materialize for other active recommendations at these levels, especially our other chip-related company, Atomera Inc. (ATOM).
I say that because this morning, news hit that Intel Corp. (INTC) is buying Israeli chip firm, Tower Semiconductor Ltd. (TSEM) for $5.4 billion, “as it looks to expand its manufacturing capacity and technology portfolio amid rising demand,” per Barron’s.
No surprise, Tower’s shares recently sold off sharply, making the acquisition all the more timely and affordable. Atomera would be no exception for a long list of deep pocketed suitors.
Getting back to the Resonant deal, it’s expected to close quickly – by the end of March. But shares are trading close to the offer price.
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