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ON Semi to acquire Fairchild for $2.4B in cash

Posted: 20 Nov 2015 ?? ?Print Version ?Bookmark and Share

Keywords:power semiconductor? smartphone? M&A? acquisition?

The acquisition wheel of the semiconductor industry continues to roll with another blockbuster deal as ON Semiconductor announced its plan to buy Fairchild Semiconductor International for approximately $2.4 billion in cash.

With total revenue of about $5 billion per year, the combined company would be the No.2 player in the power semiconductor category, with a strong focus on the automotive, industrial and smartphone end markets, ON Semi said.

Keith Jackson, ON Semi's president and CEO, said on a conference call that the primary objective of the deal is to increase ON Semi's capabilities in the medium to high-voltage segment of the semiconductor market while also improving the scale of the company in the overall analogue and power chip market.

"The complementary nature of the product portfolios of the two companies allows us to further enhance our value proposition to our customers and channel partners by offering solutions across the entire voltage spectrum," Jackson said.


Jackson: Consolidation would greatly change our competitive position.

Under the terms of the deal, ON Semi will pay $20 cash for each share of Fairchild, a premium of roughly 12 per cent over Fairchild's closing price Tuesday. The deal is expected to close in the second quarter of 2016.

ON Semi said the deal would provide $150 million in annual cost savings within 18 months after closing.

ON Semi's acquisition of Fairchild would add to an unprecedented wave of consolidation in the semiconductor industry. According to market research firm IC Insights, in the first half of 2015 alone the value of semiconductor acquisition deals totalled about $72.6 billionmore than six times the annual average for M&A deals struck during the five previous years.

The Bloomberg news service reported last month that Fairchild hired Goldman Sachs to help it find a buyer for the company.

Jackson reiterated that ON Semi generally prefers to return profits to shareholders through stock buybacks rather than spend them on acquisitions. But, given the unprecedented wave of consolidation taking place and the fact that Fairchild put itself up for sale, the acquisition makes sense, he added.

"The competitive dynamics in the industry are changing quickly," Jackson said. "Consolidation would greatly change our competitive position. As there was a process here, and this was a company that looked like it was going to do a transaction, we felt that the competitive dynamics made the most sense to do the deal rather than sit by and watch."

Jackson predicted that consolidation in the semiconductor industry would continue.

"We believe the industry will continue to consolidate at a pretty good clip, as long as the rates in the financial markets remain relatively low and growth in the overall [semiconductor] industry also remains low, we think it's inevitable that there will be further consolidation."

Fairchild is among the semiconductor industry's oldest and most venerable firms, tracing its roots back to 1957. Fairchild was acquired by National Semiconductor Corp. in 1987 but spun back out as an independent company in 1997.

- Dylan McGrath
??EE Times U.S.

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