ON Semiconductor Corp (ON.O) said it would buy Fairchild Semiconductor International Inc (FCS.O) in a $2.4 billion deal, the latest in a rapidly consolidating semiconductor industry.Shares of Fairchild were trading at $19.33 before the bell on Wednesday, slightly below the offer price of $20 per share.
The deal will help ON Semiconductor diversify its semiconductor business, which makes chips to improve power efficiency in products ranging from home appliances to automobiles.
There is little product and revenue overlap between the two companies, Chief Executive Keith Jackson said on a conference call.
The combined company will have annual revenue of $5 billion, and the revenue overlap is expected to be less than $100 million, Jackson said.
Fairchild, one of the pioneers of the semiconductor industry, has been struggling to boost growth in the face of slowing demand from the industrial, appliance and consumer markets in recent quarters.
The semiconductor industry is seeing a wave of deals this year as companies seek to cut costs, meet demand for cheaper chips and diversify portfolios as Internet-connected devices gain popularity.
Intel Corp (INTC.O) said in June it expects to close its $16.7 billion acquisition of Altera Corp (ALTR.O) within six to nine months, while Avago Technologies Ltd (AVGO.O) expects to close it $37 billion buyout of Broadcom Corp (BRCM.O) by the end of the first quarter of 2016.
More than $80 billion in semiconductor M&A has been racked up so far this year, according to Thomson Reuters data.
Jackson said it was "inevitable" that there would be further consolidation in the industry.
ON Semiconductor said it intends to fund the deal, expected to close toward the end of the second quarter of 2016, with cash from the combined company's balance sheet and $2.4 billion of new debt.
The company will have about $500 million in liquidity to run the business, ON Semiconductor's Chief Financial Officer Bernard Gutmann said on the call.
Deutsche Bank and BofA Merrill Lynch are financial advisers to ON Semiconductor, while Morrison & Foerster are the legal adviser.
Goldman Sachs is financial adviser to Fairchild and Wachtell, Lipton, Rosen & Katz is the legal adviser.
(Reporting by Devika Krishna Kumar and Lehar Maan in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D'Silva)
The deal will help ON Semiconductor diversify its semiconductor business, which makes chips to improve power efficiency in products ranging from home appliances to automobiles.
The combined company will have annual revenue of $5 billion, and the revenue overlap is expected to be less than $100 million, Jackson said.
Fairchild, one of the pioneers of the semiconductor industry, has been struggling to boost growth in the face of slowing demand from the industrial, appliance and consumer markets in recent quarters.
The semiconductor industry is seeing a wave of deals this year as companies seek to cut costs, meet demand for cheaper chips and diversify portfolios as Internet-connected devices gain popularity.
Intel Corp (INTC.O) said in June it expects to close its $16.7 billion acquisition of Altera Corp (ALTR.O) within six to nine months, while Avago Technologies Ltd (AVGO.O) expects to close it $37 billion buyout of Broadcom Corp (BRCM.O) by the end of the first quarter of 2016.
More than $80 billion in semiconductor M&A has been racked up so far this year, according to Thomson Reuters data.
Jackson said it was "inevitable" that there would be further consolidation in the industry.
ON Semiconductor said it intends to fund the deal, expected to close toward the end of the second quarter of 2016, with cash from the combined company's balance sheet and $2.4 billion of new debt.
The company will have about $500 million in liquidity to run the business, ON Semiconductor's Chief Financial Officer Bernard Gutmann said on the call.
Deutsche Bank and BofA Merrill Lynch are financial advisers to ON Semiconductor, while Morrison & Foerster are the legal adviser.
Goldman Sachs is financial adviser to Fairchild and Wachtell, Lipton, Rosen & Katz is the legal adviser.
(Reporting by Devika Krishna Kumar and Lehar Maan in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D'Silva)
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