Apple bought part of the supplier's Dialog business in a $ 600 million deal

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SAN FRANCISCO / FRANKFURT (Reuters) – Apple Inc buys part of the business of Dialog Semiconductor Plc in a $ 600 million deal, expanding iPhone's chip operations in Europe and securing the role of the German listed company as a group supplier technological technology.

A customer stands under an illuminated Apple logo as he looks out the window of the Apple store located in the center of Sydney, Australia on May 28, 2018. REUTERS / David Gray

Dialog shares rose 34% in Frankfurt at the start of Thursday, as the deal resolves questions about future relations between Apple and Dialog, whose shares have collapsed at the start of this year. 39; year when he said that Apple foresaw the use of chips from another supplier.

The acquisition is unusual for Apple, which rarely handles such offers and exceeds previous transactions. Apple bought Israel PrimeSense, creator of the facial recognition application used to unlock new iPhones, for about 350 million dollars in 2013.

Since the first iPhone ten years ago, Apple has used Dialog's power management chips to manage battery life. In the area of ​​the agreement, Apple is buying patents, a team of about 300 engineers, many of whom have already worked on chip for Apple devices and Dialog offices in Britain, Italy and Germany.

Dialog said its revenue for 2018 will not be affected and will continue shipping Apple Power Management Integrated Circuits (PMIC). Expects to sell the current and future generations of so-called sub-PMIC to Apple.

"We do not sell our PMIC activities," CEO Jalal Bagherli told analysts.

After the agreement, Dialog expects Apple to reach 35-40 percent of total revenue in 2022. This is a decrease compared to 75 percent in the current year. The organic will fall to 1,800.

The Anglo-German chip maker also announced that it will begin a buyback program of up to 10% of its stock after the next quarterly update.

Other chip designers in Europe have struggled to manage their relationship with Apple because of its scale. The British Imagination Technologies was sold to a Chinese support fund last year after losing Apple as a customer.

The Dialog semiconductor logo is depicted in a company building in Germering, near Munich, Germany, on 15 August 2016. REUTERS / Michaela Rehle

The shares of the Austrian AMS, which competes with the Dialog in areas such as energy management chips, fell by 3.8%.

EUROPE PUSH

Half the value of the deal, or about $ 300 million, is money for the engineers and the offices of Dialog and the other $ 300 million is pre-payment to Dialog for the supply of chips in the next three years , the companies said.

Dialog said it will continue to supply chips to other customers, focusing in particular on the automotive and Internet of Things markets.

It expects its sub-PMIC activity to achieve compound annual growth rates of 30-35 percent between 2018 and 2022. The AMS, Connectivity and Automotive & Industrial business would grow at a rate of 10-15 percent.

The agreement represents an expansion of Apple's chip design operations, which kicked off in 2010 when the company released its first custom processor for iPads and iPhones.

Apple is buying about 16% of Dialog's workforce. Apple said these employees will remain in Europe and report to Johny Srouji, senior vice president of hardware technology at the company that oversees Apple's chip design efforts.

"Our relationship with Dialog dates back to the early years, and we are looking forward to continuing this longstanding relationship with them," Srouji said. Apple has added about 20,000 employees in Europe since 2000. It already has a chip design center in Munich, Germany, where it employs 1,000 employees, and St Albans, in Britain. The agreement will give Apple four more news from Dialog, Livorno in Italy, Swindon in Great Britain, Nabern and Neuaubing in Germany.

The transaction is expected to close in the first half of 2019, according to the usual regulator's closures and approvals, said Dialog. Expects a savings of $ 35 million in annual operating expenses from the business, but refused to provide more details on its financial impact in view of an investor presentation on November 1st.

Dialog said that Qatalyst Partners acted as a financial advisor and Linklaters acted as a legal advisor.

Editing by Riham Alkousaa, Edmund Blair and Jane Merriman

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