Silicon Motion Technology (SIMO), mcap=$1.93bn, price $58.25 vs $78.00

$SIMO arb pitch:
– Merger arbitrage with a 90% spread and trading below pre-announcement levels.
– SIMO is a decent buy at the current price regardless if the merger closes or not.
– To be acquired by $MXL at $93.54 in cash + 0.388x in MXL shares.
– Expected to close in H1’23. Buyer is also the main competitor, but product overlap is minimal and HSR has already been cleared.
– Chinese regulatory approval is the main risk as SIMO is a Taiwanese company.
– The recent request by the Chinese regulator to refile the merger application kind of puts the merger in limbo.
– The company and the buyer operating in the flash memory storage controllers industry.

$SIMO arb valuation:
– Trades at pre-announcement levels.
– Not expensive at 15x earnings at the deal price before synergies.

Exp. gain: +38% if the merger closes.

Full SIMO arb write-up (free guest account required):

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