Infineon Technologies AG, Germany’s largest chipmaker, has agreed to buy International Rectifier Corp for about US$3 billion in cash, adding to its power-management technology business.
Infineon is to pay US$40 per share for El Segundo, California-based International Rectifier in a deal approved by both companies’ boards, Infineon said on Wednesday.
That is 51 percent more than the stock’s closing price before the deal was announced. The acquisition is Infineon’s biggest, according to data compiled by Bloomberg.
Photo: Bloomberg
Infineon chief executive Reinhard Ploss, seeking a deal since taking the job in 2012, is betting on rising demand for chips, such as those used in car electronics and to manage battery power in mobile devices. The deal also puts Infineon closer to the technology hub of Silicon Valley.
“It is very important for us to be in the US and close to the highly innovative region of California,” Ploss said on a conference call. “International Rectifier does that.”
International Rectifier makes chips that help manage power flow in devices including satellites, cars, lighting systems and aircraft. The company reported a 13 percent increase in revenue in the year ending June to US$1.11 billion and swung to a profit of US$58.7 million after reporting an US$88.8 million loss previously.
The deal is to be funded using cash and a 1.5 billion euro (US$2 billion) line of credit, and is to be accretive to pro-forma earnings per share in the fiscal year ending in September next year, Infineon said.
Infineon, based near Munich, expects to complete the purchase by early next year, subject to regulatory approval.
Infineon expects so-called sector profit at International Rectifier to catch up with its goal of 15 percent of earnings within two years of the deal’s completion, chief financial officer Dominik Asam said during a conference call with journalists, declining to specify what cost savings the integration of the company might generate.
Asam expects to cut jobs at International Rectifier, which has administrative costs that are 4 percent higher than Infineon’s relatively, he said.
There is also scope to manufacture some International Rectifier products at Infineon’s existing facilities, Asam said.
Infineon increased profit for the past four straight quarters and its net cash reached 2.1 billion euros at the end of June. In May, the chipmaker said it would raise its dividend as early as this fiscal year as advances in productivity curb the investment needed to achieve its target growth rate.
“They would like to build a stronger presence in power management,” Liberum Capital Ltd analyst Janardan Menon said.
The part of the industry Infineon is targeting has “high barriers to entry and strong growth prospects,” Menon said.
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