German chip company Infineon Technologies AG has moved to buy one of the oldest companies in the semiconductor industry, power chip vendor International Rectifier Corp. Infineon has offered to pay $40 per share, or about $3 billion, in an all-cash deal that would change the dynamics of the power semiconductor market.
The announcement of the deal was not unexpected as speculation had mounted during the day that Infineon had a high value deal in the power semiconductor sector close to agreement. The deal puts an enterprise value on International Rectifier (IR) of $2.4 billion.
Infineon's offer represents a price premium of 50 percent over the closing share price of IR on Aug. 19.
Infineon is already a leading manufacturing of power semiconductors and is bringing up production on 300mm-diameter wafers at its Dresden wafer fab. Infineon said the deal to acquire IR is complementary, adding system know-how in power conversion and expanding expertise in gallium-nitride-on-silicon production. In addition, the merger of IR with Infineon's power semiconductor operation drives economies of scale in production, the company said.
IR was founded in 1947 by Eric Lidow, who was born in Vilnius, Lithuania, and fled Nazi Germany shortly before the outbreak of the Second World War after graduating from the University of Berlin. The Lidow family retained senior management positions within IR until recent times. Founder Eric Lidow died last year at the age of 100.
Infineon said that IR's expertise in low-power, energy-efficient IGBTs and intelligent power modules, power MOSFETs and digital power management ICs (PMICs) will integrate well with Infineon’s offering in power devices and modules.
IR also announced financial results for its fiscal year 2014, which ended June 29. For the full fiscal year, IR made a net profit of $58.7 million on revenue of $1.11 billion, having turned around a loss in the previous financial year. Revenue was up by 13.3 percent from $977 million in the prior fiscal year.
Infineon adds a billion dollars in annual sales
For the calendar year 2013 Infineon was ranked by IHS, publisher of Electronics 360, as the 12th largest chip company in the world with sales of $5.2 billion. IR was ranked 50th with sales in the calendar year of $1.04 billion. The combined sales of the companies would have ranked them 11th in 2013.
The combined market shares of Infineon and IR for the total power semiconductor market is close to 18 percent. The companies are currently the No. 1 and No. 2 ranked vendors of MOSFETs, with a combined market share of 25 percent, according to IHS.
"No other supplier comes close to that size of share," said Victoria Fodale, a senior analyst for power discretes and modules at IHS. "The competitive dynamics of the power semiconductor market will certainly change."
In the narrower discipline of power management ICs, IR ranked 17th in global sales in 2013 with revenues of $206 million, according to IHS. Infineon ranked ninth with $419 million of PMIC sales. The combined sales of the two companies would have ranked ninth in PMICs in 2013, according to the IHS data.
As well as providing opportunities to speed up the ramp of 300mm manufacturing of power semiconductors Infineon said IR would help provide broader and stronger regional sales as IR has a strong presence in the US and would help improve Infineon's position in Asia.
The deal has been approved by IR's board of directors and Infineon's supervisory board. The closing of the transaction is subject to regulatory approvals in various jurisdictions and customary closing conditions, as well as approval of International Rectifier stockholders. The transaction is expected to close late in 2014 or early 2015 and is subject to regulatory approval.
"With their great knowledge of specific customer needs and their application understanding, International Rectifier employees will contribute to Infineon’s strategic development from product thinking to system understanding and system solutions. The combination of Infineon’s and International Rectifier’s products, technological and innovative excellence, as well as distributional strength will unleash great potential," said Reinhard Ploss, CEO of Infineon Technologies, in a statement.
"By combining two complementary providers in power management solutions, International Rectifier will benefit from Infineon’s products and technologies, manufacturing and operational excellence and greater R&D scale," said Oleg Khaykin, CEO of International Rectifier, in the same statement.
Related links and articles: