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Silicon Labs beat Q4 earnings this morning.
No one cares about that though, because Texas Instruments is buying Silicon Labs.
Silicon Labs (NASDAQ: SLAB) stock skyrocketed 48% through 11:25 a.m. ET Wednesday after announcing its Q4 results -- and more importantly, also announcing Texas Instruments (NASDAQ: TXN) will buy it.
Image source: Getty Images.
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Silicon Labs beat earnings in its Q4 report. Analysts expected the semiconductor stock to earn $0.55 per share on sales of $207.6 million. Silicon Labs beat on both top and bottom lines, reporting $0.56 per share (adjusted) on $208 million in sales.
Of course, the "earnings beat" pales in significance to the day's bigger news. To "create a global leader in embedded wireless connectivity solutions," Texas Instruments will acquire and bring Silicon Labs in-house.
Paying $231 per share cash, Texas Instruments proposes to acquire Silicon Labs for $7.6 billion. (Minus Silicon Labs' net cash position, the enterprise value is "approximately $7.5 billion.)
In exchange, Texas Instruments will acquire a subsidiary that's grown revenues 15% annually for more than a decade, that took in $785 million in sales last year, that lost $65 million -- but generated nearly $66 million in positive free cash flow.
Silicon Labs stock ran up on the news today, but at $203 and change, still has another 14% to go before it reaches the price Texas Instruments wants to pay for it.
TI says it hopes to close this transaction in the first half of 2027 -- so investors who buy and hold Silicon Labs stock might potentially need to wait more than a year to cash in. For a 14% return that might be worth it, but with Silicon Labs stock now valued at more than 100 times free cash flow, and closing no sure thing, there is risk involved.
Caveat investor.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Texas Instruments. The Motley Fool has a disclosure policy.
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