ON Semiconductor and Fairchild Semiconductor International have entered into a definitive agreement for ON Semiconductor to purchase Fairchild for $20.00 per share in an all-cash transaction totaling approximately $2.4 billion. The combined revenue of the companies is approximately $5 billion and represents multiple markets such as automotive, industrial and smartphones.
"As predicted, the wave of consolidation continues with the latest announcement of ON Semiconductor’s purchase of Fairchild. It is interesting to read the news stories that emphasize that 2015 is a record setting year for acquisition activity in the Technology sector," says Dale Ford, IHS Vice President & Chief Analyst.
The semiconductor industry continues to consolidate. ON receives an immediate EPS benefit with the purchase. Fairchild will continue its focus on efficient energy consumption after the deal closes. ON Semiconductor anticipates an annual cost savings of $150 million within 18 months after closing the transaction. It will fund the transaction with cash from the combined companies balance sheet plus $ 2.4 billion of new debt. The debt financing commitment also includes provisions for a $300 million revolving credit facility.
"On Semiconductor has a highly diversified portfolio when viewed across almost every component category, application market and region. The acquisition of Fairchild will leapfrog On Semiconductor into the top ranks of the Power Discrete market which is forecast to be one of the higher growth markets over the next five years. It also strengthens their position in the Voltage Regulator Markets and Standard Logic markets which are also forecast to perform above the overall semiconductor market in the coming 5 years. Strengthening and growing this portion of their portfolio should help them to compete more effectively in the higher growth segments in the semiconductor industry," says Ford.
The transaction has been unanimously approved by the ON Semiconductor and Fairchild boards and is expected to close in the late second quarter of 2016. No approval of the stockholders of ON Semiconductor is required in connection with the proposed transaction.
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