ON Semiconductor to Buy Fairchild Semiconductor for $2.4 Billion
November 18 2015 - 7:30AM
Dow Jones News
ON Semiconductor has agreed to acquire fellow chip company
Fairchild Semiconductor for about $2.4 billion in cash, the latest
deal in the consolidating semiconductor space.
The price tag of $20 a share values Fairchild at a 41% premium
to where the stock was trading before news reports last month
suggested Fairchild was seeking a buyer. ON said it would fund the
deal through cash on hand and $2.4 billion in new debt.
The tie-up brings together two companies with complementary
product lines in a rapidly consolidating semiconductor industry,
said ON Chief Executive Keith Jackson. The move to boost ON's
presence in the industrial, automotive and smartphone markets will
immediately add to ON's earnings, the company said.
Fairchild, the descendant of a seminal Silicon Valley startup
founded in 1957, sells thousands of components used in cars,
smartphones, appliances and other products. Where companies like
Intel Corp. build costly factories to create ultrasmall circuitry
on expensive chips, Fairchild uses older production lines to churn
out low-price products.
Based in San Jose, Calif., Fairchild has struggled in recent
quarters amid lower demand from the telecom sector, and mobile and
appliance customers. Last year, the company moved to eliminate jobs
and some manufacturing operations as part of a plan to cut
costs.
Amid slowing growth and rising costs, chip companies have so far
this year announced about $100 billion in mergers and acquisitions,
according to Dealogic, exceeding the $37.7 billion total for all of
2014. Deals include Avago Technologies Ltd.'s sector-record $37
billion purchase of Broadcom Corp., announced in May, and Intel
Corp.'s planned $16.7 billion acquisition of Altera Corp.
ON said Wednesday that it anticipates annual cost savings of
$150 million within 18 months after closing the transaction. The
deal is expected to be completed in the second quarter of 2016.
Shares in ON, up 6% this year, were inactive premarket.
Fairchild's stock, up 6% this year amid takeover speculation, added
7.1% to $19.15.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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(END) Dow Jones Newswires
November 18, 2015 07:15 ET (12:15 GMT)
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