2023-04-19 13:02:16 ET
Silicon Motion's ( NASDAQ: SIMO ) downside appears to be limited in a potential deal break in its sale to MaxLinear ( NASDAQ: MXL ) as China regulators continue to scrutinize the combination, according to a Susquehanna analyst.
Silicon Motion ( SIMO ) has potential downside to $58 a share in a deal break, Susquehanna analyst Mehdi Hosseini wrote in a note on Tuesday. SIMO may have upside to $106 a share if the cash and stock sale to MaxLinear closes.
The downside risk to $58 is based on 12x trough earnings of $3.95 plus net cash and proceeds from a MaxLinear ( MXL ) breakup fee, according to Hosseini, who has a positive rating on Silicon Motion ( SIMO ).
"We argue that the shares still offer an attractive risk/reward profile, especially in an uncertain demand environment," Hosseini, who cut his price target on SIMO to $106 from $108 on Tuesday.
The analyst comments come as China's antitrust review of the transaction has dragged on for months. Earlier this month the WSJ reported that Chinese regulators have recently slowed down merger reviews i n a number of proposed U.S. deals, including MaxLinear's ( MXL ) planned $3.8 billion acquisition of Silicon Motion .
Silicon Motion ( SIMO ) shares fell 1.2% on Wednesday, while MaxLinear ticked down 0.8%.
Last month Dealreporter said report China's review of MaxLinear's (NASDAQ: MXL ) planned purchase of SIMO was not in the final stages , at least partly refuting comments from the CEO of a rival company who indicated there was speculation the deal could be approved.
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Silicon Motion downside risk limited in potential MaxLinear deal break - analyst