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Vishay sweetens IR takeover bid to $1.7B

Posted: 12 Sep 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Vishay IR takeover? power IC? passive electronics? discrete semiconductor?

Amid lowered forecast by some and a sudden slowdown for discrete semiconductors, Vishay Intertechnology has increased its bid to acquire International Rectifier for $1.7 billion.

Vishay has also proposed three new directors for and has commenced litigation in the Delaware Chancery Court regarding the timing of IR's delayed 2007 and 2008 annual meetings and its proposed bylaw amendments.

Last month, Vishay made a non-binding, unsolicited proposal to acquire IR for $1.6 billion in stock. The increased proposal represents a premium of 22 percent to IR's closing stock price on Aug. 14, the last trading day prior to public disclosure of Vishay's original acquisition proposal.

IR rejected that bid, but Vishay is moving full speed ahead. "We firmly believe there are significant and compelling benefits to a combination of Vishay and IR. We are committed to bringing our two companies together to create a global leader in the manufacturing of power ICs, discrete semiconductors and passive electronic components," said Felix Zandman, Vishay's founder and executive chairman, in a statement.

Vishay also announced its intention to nominate three independent candidates for election to the IR board. They include Ronald Ruzic, William Vinson, and Yoram (Jerry) Wind.

Prior to retiring in 2003, Ruzic was executive VP of BorgWarner Inc. since 1992 and group president of BorgWarner Automotive Inc. since 1989. Vinson is currently a director and the chairman of Siemens Government Services Inc. while Wind is the Lauder Professor and professor of marketing and director of SEI Center for advanced studies in management at The Wharton School, the business school of the University of Pennsylvania.

In response, IR urged shareholders to take no action with respect to the unsolicited proposal. In a statement, Richard Dahl, chairman of IR, said: "We wish to clarify that we have not entered into negotiations with Vishay because it had submitted, until today, only one proposal, for $21.22 per share on August 14 that was rejected by our board. The board declined subsequent requests for negotiations since there was no change in a proposal that our board had determined was opportunistic, inadequate and not in the best interests of the company and its shareholders."

Discrete market slowdown
The events come amid a slowdown in discrete ICs, which are sold by IR, Vishay and others. Demand has slow in the arena in August, according to a survey of discrete semiconductor distributors conducted by Longbow Research analyst Shawn Harrison.

"August sales of discrete semiconductors moderately softened and fell slightly behind forecast and historical findings. Sales trended flattish to down for the month of August due to seasonal declines in Europe and to an extent North America, essentially offsetting a seasonal uptick in Asia," he said in a report.

Regionally, the demand for discrete ICs was weak in Europe and North America, offsetting a seasonal uptick in Asia.

Harrison found that distributors in Asia are forecasting high-single-digit sales growth, European distributors are forecasting low-single-digit sales growth and North American distributors are forecasting flattish sales.

In light of his survey findings, Harrison reduced his earnings estimates for Vishay and Diodes Inc. "We are now forecasting EPS of $0.22, a decline of $0.01 for Vishay in Q3 and EPS of $0.31 a decline of $0.01 for Diodes. Our 2008 and 2009 EPS forecasts also decline," he said.

"The key for Vishay remains a recovery in profitability at Siliconix and a more consistent earnings performance. In addition, if Vishay is able to acquire IR at or at a slight premium to the current offer price, there are considerable synergies that can be generated long term," he added.

- Mark LaPedus
EE Times

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