Microchip Technology, with the help of ON Semiconductor, is leading a $2.3bn takeover bid for Atmel.

This bid follows Atmel’s refusal last month to enter into takeover talks with Microchip.

It is possibly Atmel’s 32-bit microcontrollers which are of leading interest to Microchip, which is the leading supplier of 8-bit microcontrollers and has recently introduced its first 32-bit MCU.

Atmel has an established range of 32-bit MCUs based on its own AVR processor architecture and, most significantly, ARM processor cores.

Microchip selected a processor core from MIPS Technology for its first 32-bit microcontrollers, so acquisition of Atmel would expand its 32-bit microcontroller offering significantly. This is important because 32-bit MCUs represent the fastest growing microcontroller market.

Atmel has the added benefit of bringing, another hot technology, capacitive touch sensing, which it acquired from UK-based Quantum Research last year.           

Microchip would acquire Atmel in a cash merger. This would be financed by a combination of cash from Microchip and proceeds from the sale of certain Atmel assets to ON Semiconductor. 

The plan is that ON would acquire the assets related to Atmel’s non-volatile memory and RF and automotive businesses. 

The only part of Atmel the companies do not want is the small Asic business which will be sold.

Microchip and ON are offering $5.00 per share in cash.  The proposal, which is being led by Microchip, provides a premium of 52.4% to Atmel’s closing price of $3.28 on October 1 and values Atmel at $2.3 billion.