On Tuesday, January 27th, Silicon Image agreed to be acquired by Lattice Semiconductor (LSCC) for $7.30 per share in cash. The deal is expected to close by the end of March.

Now that SIMG has put itself up for sale, there is always the chance that a competing bid will materialize that could be higher than $7.30. I’m not saying a higher offer is likely, but I’m willing to wait a bit to see if a higher offer appears. Several shareholder lawsuits have been filed this morning claiming the $7.30 acquisition price is too low.

I’m curious what activist investor Engaged Capital (5.2% ownership stake in SIMG) thinks about this deal given that it is on record stating that SIMG is worth a minimum of $7.69 per share and upwards of $11.20 per share. So far, Engaged Capital has declined comment.

Unless a higher offer materializes, Silicon Image’s stock price will stay fixed at its current price of around $7.30, so there is no upside remaining and the stock can no longer be rated a “buy.” The good news is that Silicon Image has appreciated in price by almost 50% since it was recommended by Roadrunner Stocks back in August (less than six months ago).

I am changing the stock rating on SIMG to a “hold” and may recommend selling it soon if I determine that the $7.30 offer price is the final price.

Happy Investing,

Jim Fink