Allegro MicroSystems, Inc. (NASDAQ:ALGM) has entered into a share repurchase agreement with Sanken Electric Co., Ltd., according to a recent 8-K filing with the Securities and Exchange Commission (SEC). The agreement, dated Tuesday, involves Allegro repurchasing 38,767,315 shares of its common stock from Sanken in a privately negotiated transaction at the same price per share as the public underwritten equity offering announced concurrently.
This repurchase is expected to retire the shares acquired from Sanken, resulting in Sanken's ownership of Allegro common stock reducing to approximately 33.2%, or 32.5% if the underwriters' option to purchase additional shares is fully exercised. The repurchase is set to occur one business day after the equity offering's closing, with the funding sourced from the offering's net proceeds. Any remaining shares will be repurchased at a later date, with funding from either the equity offering's net proceeds, cash on hand, or additional borrowings under Allegro's Credit Agreement.
In relation to this transaction, Allegro also amended its existing credit agreement to facilitate the repurchase, increase its revolving commitments, and make other unspecified changes. However, the company cautions that there is no assurance that the incremental term loans or the increase to revolving commitments will be completed as described, or at all.
Alongside the repurchase agreement, Allegro's board approved a Second Amended and Restated Stockholders Agreement with Sanken, which will take effect on July 29, 2024. This agreement updates the terms regarding board nomination rights and Sanken's obligations to vote in favor of board-nominated directors.
Concurrently, Allegro announced preliminary financial results for the quarter ended June 28, 2024, and the planned resignation of Kojiro (Koji) Hatano from Allegro's board, effective upon the first closing of the share repurchase. Hatano's departure is not due to any disagreement with the company but is related to the anticipated decrease in Sanken's ownership stake.
In other recent news, Allegro MicroSystems, a leading provider of power and sensing solutions, has launched two new current sensors, the ACS37220 and the ACS37041. These sensors are designed to enhance design efficiency and reliability in various applications, with the ACS37220 capable of monitoring high currents up to 200A and the ACS37041 catering to a broad spectrum of current sensing needs up to 30A. These developments highlight Allegro's commitment to advancing sensor technology and providing efficient solutions for sectors including automotive, industrial automation, and clean energy.
Moreover, Allegro's fiscal year 2024 earnings and revenue results surpassed market expectations, demonstrating an 8% growth in revenue and a significant 38% increase in e-mobility sales. These robust figures have propelled the company's annual sales and design wins past the $1 billion milestone.
However, Mizuho has maintained its Buy rating on Allegro MicroSystems but lowered the stock target from $45 to $35, citing high inventories at auto and industrial customers as short-term challenges. Despite this, Mizuho remains confident in Allegro MicroSystems' long-term prospects, particularly in the e-Mobility sector. These are the recent developments that reflect Allegro's strong performance and strategic positioning in the industry.
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