China Electronics in talks to buy Atmel

People visit the stand of CEC (China Electronics Corporation) during a fair in Fuzhou city, Southeast China's Fujian province, June 18, 2015. [Photo/IC]

China Electronics Corp, the nation's largest State-owned information technology company, is in preliminary talks to acquire United States-based Atmel Corp, according to industry sources.

CEC is believed to be discussing a bid for Atmel, a maker of chips used in industrial machinery and cars, at about $8.5 a share. Atmel shares closed at $8.18 in New York trading on Wednesday, down from a high of $10.44 in June, giving the California-based company a market value of about $3.4 billion. There is no guarantee a deal will get done, and talks may still fall apart.

The thin premium being discussed and the regulatory scrutiny that would come with a Chinese buyer raise the risks that a deal might not materialize, according to one source.

A combination of CEC with Atmel would likely be subject to approval from the Committee on Foreign Investment in the US. There is also the possibility that other suitors could emerge and an agreement could be reached with a different company. The thin premium implied by the offer price compared with Wednesday's close is at odds with industry deals done earlier this year.

Intel Corp, the world's biggest chipmaker, said in June it will pay $54 a share for Altera Corp, 11 percent more than the company's share price at the time and a 56 percent bump over where it had traded before speculation of an acquisition.

Atmel said last month it has been considering strategic options. Any sale would extend a record year for semiconductor deals, as chipmakers combine to counter slowing growth and increasing costs.

China has been picking up US chip-related assets as it tries to increase its domestic capabilities and replace imports of crucial electronics components.

Agnes Toan, a spokeswoman for Atmel, said the company did not comment on rumors or speculation. A spokeswoman for the Beijing-based CEC said she could not immediately comment.