ATML Atmel Corp.

FRANKFURT—Activist hedge fund Elliott Management called on fellow shareholders in Dialog Semiconductor PLC to vote against the U.K. based chip maker's planned $4.6 billion acquisition of U.S. peer Atmel Corp. in a move that threatens to derail the deal.

In an open letter Monday, Elliott Associates LP and Elliott International LP—two vehicles that jointly hold 2.9% in Dialog—wrote: "We intend to vote against this value destructive transaction at the forthcoming Dialog shareholder meeting [on 19 November] and we urge our fellow…shareholders to seize this opportunity to try to reclaim that lost value by also VOTING AGAINST [it],"

A spokeswoman for Dialog declined to comment.

Dialog, which was spun off from German luxury-car maker Daimler Benz AG in 2000, needs 50% of shares voted to approve the transactions to go ahead. The threshold, albeit lower than the usual 75% requirement, might be tough to reach after proxy advisors International Shareholder Services Inc. and Glass Lewis also recommended voting against the deal.

Dialog, which sells chips used to manage power in high-end smartphones, including those made by Apple Inc., in September announced it reached an agreement to buy San Jose, Calif.-based Atmel. Atmel is best known for chips called microcontrollers that provide computing power for many kinds of consumer and business hardware.

Jalal Bagherli, Dialog's chief executive, said the deal will help the company reduce dependence on a few smartphone makers. At the same time, he said, acquiring Atmel's customer base and line of products will make Dialog a major player in chips for connected cars, wearable devices and other networked gadgets lumped under the catchall phrase Internet of Things.

But the Paul Singer-led Elliott believes the deal represents $500 million in value destruction for Dialog investors because the deal premium exceeds the expected synergies. Dialgog's share price has fallen about 18% since the deal's announcement September 20.

Write to Eyk Henning at eyk.henning@wsj.com

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(END) Dow Jones Newswires

November 09, 2015 18:25 ET (23:25 GMT)

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