Microchip plans $1.35 billion preferred stock sale

CHANDLER, Ariz. - Microchip Technology Incorporated (NASDAQ: MCHP), a key player in embedded control solutions with a market capitalization of $29.41 billion, is set to issue $1.35 billion in depositary shares, each representing a 1/20th interest in a share of its Series A Mandatory Convertible Preferred Stock. According to InvestingPro analysis, the company is currently trading at high valuation multiples across earnings, EBIT, and EBITDA metrics. Today, the company also mentioned the possibility of an additional $135 million offering to cover over-allotments.

The proceeds from this offering, which is subject to market and other conditions, are earmarked for various corporate purposes. Microchip intends to allocate a portion of the net proceeds to fund capped call transactions, which are expected to minimize the dilutive impact of the preferred stock conversion on common shareholders. The remaining funds are slated for debt repayment, including obligations under its commercial paper program. InvestingPro data shows the company maintains a healthy current ratio of 2.25, with liquid assets exceeding short-term obligations, suggesting strong financial flexibility for debt management.

The depositary shares are anticipated to list on The Nasdaq Global Select Market under the ticker MCHPP, although there is currently no public market for these securities. The preferred stock, unless converted earlier, will automatically convert into common stock on or about March 15, 2028, with the conversion rate and other terms to be set at the time of the offering’s pricing.

J.P. Morgan, BofA Securities, and BNP Paribas are the lead joint bookrunning managers for the offering, with J. Wood Capital Advisors serving as Microchip’s financial advisor.

The company has also advised that the option counterparties or their affiliates may engage in derivative transactions and secondary market activities that could affect the price of Microchip’s common stock and the depositary shares. These activities may occur following the pricing of the depositary shares and up to the mandatory conversion date of the preferred stock.

This announcement comes in accordance with a registration statement on Form S-3 that has been filed with the SEC and is now effective. The offering is made only by means of a prospectus supplement and accompanying prospectus, details of which can be obtained from the SEC’s website or directly from the managing banks.

Investors are cautioned that forward-looking statements regarding the offering, its terms, and the use of proceeds involve risks and uncertainties that could cause actual results to differ materially from those anticipated. With a beta of 1.52 and recent stock volatility, InvestingPro subscribers can access 14 additional ProTips and a comprehensive Pro Research Report, providing crucial insights for navigating this investment opportunity. The company maintains a notable dividend yield of 3.36% and has consistently paid dividends for 24 consecutive years.

This news is based on a press release statement from Microchip Technology Incorporated.

In other recent news, Microchip Technology has introduced the PIC32A family of microcontrollers, designed to cater to high-performance applications across various sectors. These MCUs operate at 200 MHz and incorporate advanced features like high-speed analog peripherals and a 64-bit Floating Point Unit, enhancing data-intensive processing capabilities. The new product line is available for purchase, with prices starting at less than $1 each for volume orders. Meanwhile, analysts have been adjusting their outlooks for Microchip Technology. TD Cowen increased its price target for the company to $60, maintaining a Hold rating, while Stifel reiterated a Buy rating with an $80 target, citing a positive outlook on the company’s strategic initiatives. Rosenblatt also maintained a Buy rating with a $70 target, highlighting the company’s recovery plan and management’s focus on long-term growth. Evercore ISI raised its price target to $71, emphasizing improvements in net bookings and a stabilizing backlog. These developments reflect a cautiously optimistic view among analysts regarding Microchip’s future performance.

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