Synaptics Inc. (NASDAQ: SYNA) Shoots Up Overnight After Announcing Acquisition and Revising Revenue Forecasts

Synaptics, Acquire, Managment, PC, Mobile, ProductsOn Tuesday Synaptics Inc. (NASDAQ: SYNA), a developer of human interface solutions, ended the day down 1.32% to $66.52 a share.  After market hours, Synaptics announced that it has reached an agreement to buy 100% of Renesas SP Drivers for a purchase price of approximately $475 million.  Synaptics intends to fund the transaction with cash and committed debt financing of $300 million. 

In a separate statement, Synaptics announced that it has raised its fourth quarter revenue forecast into the range of $300 million to $310 million from $275 million to $295 million.  This range represents an increase of 30% – 35% over the prior year quarter. Furthermore, management expects revenue for fiscal year 2014 to come in between $933 million to $943 million. These raises coming from better-than-expected sales of mobile and PC products.

Investors celebrated these announcements as Synaptics is up over 22.65%% overnight.

Renasas Synergies

Renasas SP Drivers builds mobile display chips and with this acquisition significantly improves Synaptics’ market position. Synaptics CEO Rick Bergman says “The acquisition of Renesas SP Drivers unites complementary and best in-class technologies… Strengthening Synaptics’ position as the No. 1 touch-screen controller supplier to the mobile display market.” 

One of Synaptics goals is to integrate its touch technology with Renasas’ display drivers into one chip.  This would lead to major manufacturing cost advantage as according to Feltl & Co analyst Jeffrey Schreiner “There is no one else that can do touch display driver integration right now. There is no other competitor”

Apple Connection

Another factor in this deal is that while Synaptics is no longer a supplier for Apple (NASDAQ:AAPL); Renesas currently supplies the liquid crystal display chips for the iPhone.   In fact,the only reason this deal was able to come through according to a Reuters Report was because talks between Apple and Renesas “failed to make progress.” 

It will be interesting to see how Apple reacts to Synaptics, whose chips are used in Samsung Electronics devices such as the Galaxy S5 and the Galaxy Note 3, acquiring one of its suppliers. 

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