After 2-1/2 months of discussion, the special committee AST formed to evaluate Samsung's offer today approved a stock swap deal worth $170 million.
The companies have signed a definitive merger agreement. Samsung will commence a tender offer to acquire all outstanding shares in the troubled computer maker not currently owned by Samsung or its affiliates for $5.40 per share, in cash.
The deal is valued at roughly $170 million, based on 31 million outstanding shares of AST common stock. Samsung and its affiliates currently own 46 percent of AST common stock and have options to increase their share to 49 percent.
The deal will provide Samsung with immediate presence in the U.S. market.
"Samsung is aiming for volume in a price-competitive market, but will have to reduce operating cost to a bare minimum. AST will be Samsung's personal computer marketing division," said analyst Ian Gilson with Van Kasper & Company.
Samsung first approached AST in January and offered to buy up remaining shares at $5.10 a share, or $469 million, including the assumption of $307 million in debt.
Rather than jump on the offer, AST's board of directors formed a special committee to evaluate the proposal and other possibilities. Analysts have said the hesitation was just a formality.
AST's stock climbed almost 8.5 percent to close at 5-5/32, up 13/32 from yesterday's close.
"I think it is a reasonable deal. Since Samsung already owns a large portion of the company, they will not pay a premium value," Gilson said.
Wasserstein Perella Securities analyst Steven Dube said that Samsung's holdings in the company are the only reason that AST stock is trading so high. AST has posted a net loss for the past ten consecutive quarters.
AST said this move should give customers reassurance that the company is back.
"We're taking the long-term approach for the PC business and our goal is to increase brand awareness and market share. There are lots of synergies between Samsung and AST. AST has a very large, well-established brand name, and Samsung already makes PC peripherals and components," Epperson said.
The merger is subject to certain terms and conditions, including expiration of the waiting period under the Hart-Scott-Rodino Act and the approval of various foreign government officials and agencies, including the Republic of Korea.