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Synaptics Inc SYNA

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Morningstar’s Analysis

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Synaptics’ DSP Group Acquisition Smartly Expands IoT and Wireless Offerings; Maintaining $145 FVE

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

On Aug. 30, no-moat Synaptics announced that it was acquiring DSP Group for $22 per share, which suggests a deal price of about $530 million, in an all-cash transaction that is expected to close by the end of calendar 2021. The purchase price represents an 18% premium to the closing price of DSP’s stock on Aug. 26, which we think is reasonable. DSP Group, a leading provider of voice and wireless chipsets for smart-enabled devices, is positioned at the intersection of “Internet of Things” applications and converged communications, resulting in a market-leading “Internet of Audio Things” position. Despite the expected $30 million annual run-rate synergies for the new entity, our model already considers a significant growth runway in IoT alongside a continuing mix shift toward the IoT business segment. As a result, we are maintaining our fair value estimate of $145 per share. With shares trading around $187, we recommend waiting for a pullback before investing.

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Company Profile

Business Description

Synaptics Inc develops human interface solutions that allow touch, display, fingerprint, video, audio, and voice functions for smartphones, PCs, automotive vehicles, consumer Internet of Things products, as well as other electronic devices.

1251 McKay Drive
San Jose, CA, 95131
T +1 408 904-1100
Sector Technology
Industry Semiconductors
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jun 26, 2022
Stock Type Cyclical
Employees 1,463