Feds Hit Tech Merger with Antitrust Lawsuit

Microsemi Corp., a maker of high performance analog mixed signal integrated circuits, says it will vigorously defend itself against a Department of Justice antitrust lawsuit claiming Microsemi's July $25 million cash acquisition of competitor Semicoa has resulted in a monopoly.

Microsemi Corp. said Dec. 19 it would vigorously defend itself against an antitrust lawsuit filed by the Department of Justice claiming Microsemi's $25 million cash acquisition of Semicoa eliminated or reduced competition in the development, manufacture and sale of semiconductor devices used in military and space programs.

Microsemi, of Irvine, Calif., makes high performance analog mixed signal integrated circuits and high reliability semiconductors. In July Microsemi announced it was acquiring Semicoa, which specializes in semiconductors and smart munitions optoelectronics as well as analog mixed signal integrated circuits.

The DOJ antitrust complaint alleges the acquisition created a monopoly for small signal transistors that meet Department of Defense standards. The complaint also claims the deal reduced from three to two the number of likely competitors for ultrafast recovery rectifier diodes that meet DOD standards.

"Critical military and aerospace systems used by the Department of Defense and NASA depend on the performance of the small signal transistors and ultrafast recovery rectifier diodes at issue," Deborah A. Garza, the acting assistant attorney general for the DOJ's Antitrust Division, said in a Dec. 18 statement. "The department brought this lawsuit to restore to customers the benefits of competition in both pricing and responsive and timely delivery of these vital components."

Garza said that while consolidation within the defense industry can be beneficial, the Microsemi-Semicoa deal would result in "higher prices, lower quality of service and increased supply vulnerability."

The DOJ is asking the court to require Microsemi to undue the merger by selling off its Semicoa assets. The DOJ also intends to seek preliminary relief to preserve the Semicoa assets pending a trial of the DOJ's claims. Semicoa is located in Costa Mesa, Calif.

In addition, the DOJ complaint claims that after Microsemi acquired Semicoa, Microsemi significantly raised prices on small signal transistors certified by the Department of Defense. According to the DOJ, industry participants depend on the DOD certifications for electronic components used in space, military and commercial applications.

Microsemi said Dec. 19 that for calendar year 2007, the last full calendar year preceding the 2008 acquisition of the Semicoa assets by Microsemi, the revenues generated by the Semicoa from the sales of the products covered in the complaint were approximately $8.3 million. Microsemi's 2008 fiscal year revenues were $514.1 million.