Elliott Increases Dialog Stake, Still Opposes Atmel Deal

FRANKFURT—Activist hedge fund Elliott Management on Wednesday said it has increased its stake in Dialog Semiconductor PLC and reiterated its opposition to the U.K.-based chip maker's planned $4.6 billion acquisition of U.S. peer Atmel Corp., intensifying the spat with the chipmaker and threatening to derail the deal.

Elliott Associates LP and Elliott International LP now hold a combined 3.6% in Dialog, up from 2.9%.

"Dialog's share price declined by 26%…from the day prior to the announcement of the [Atmel] transaction," but regained 19% since two proxy advisors and Elliott have published their opposition to the deal, Elliott said. This underlines the skepticism of investors, the hedge fund added.

Dialog declined to comment late Wednesday. Earlier In the day, the company said Elliott seems focused on the short term, and exaggerates both the deal premium and the debt levels the transaction would bring for Dialog, all while neglecting the potential.

Elliott reiterated Wednesday it believes the acquisition is too pricey. People familiar with the matter said Atmel's share price had increased considerably prior to announcement of the proposed deal, fueled by speculation and despite analysts lowering their earnings estimates.

Dialog, which was spun off from German luxury-car maker Daimler-Benz AG in 1999, needs 50% of shares voted to approve the transactions to go ahead. The threshold, albeit lower than the usual 75% requirement, might be tough to reach as Elliott said it is gathering support from fellow shareholders.

Dialog, which sells chips used to manage power in high-end smartphones, including those made by Apple Inc., in September announced it reached an agreement to buy San Jose, Calif.-based Atmel. Atmel is best known for chips called microcontrollers that provide computing power for many kinds of consumer and business hardware.

Dialog said the deal will help the company reduce dependence on a few smartphone makers. At the same time, he said, acquiring Atmel's customer base and line of products will make Dialog a major player in chips for connected cars, wearable devices and other networked gadgets lumped under the catchall phrase Internet of Things.

But the Paul Singer-led Elliott said it believes the deal represents $500 million in value destruction for Dialog investors because the deal premium exceeds the expected synergies.

Write to Eyk Henning at [e-mail]

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November 11, 2015 17:35 ET (22:35 GMT)

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