Infineon Technologies AG accepted to obtain Cypress Semiconductor Corp. Also, the company agreed with a deal that values the U.S. target at around $10 billion as well as debt. And this is a mega-deal for a company with weak growth.
Cypress is a memory chip maker re-positioning as a provider to automobiles and other connected devices. And the deal confers an enterprise value of 9 billion euros or $10 billion. Moreover, Infineon’s cash offer of $23.85 a share resulted in a 46% premium to the average price of Cypress over the last 30 days.
Aside from that, Infineon’s share declined as much as 6.5% in the early trading on Monday in Frankfurt.
Over the last five years, the industry of semiconductor transformed as companies merge to gain scale. At the same time, it fights increasing costs and narrowing customer bases.
For instance, the NXP Semiconductors NV reported a $1.76 billion deal with the Wifi connectivity business of Marvell Technology Group Ltd. Also, Nvidia Corp. settled to purchase chipmaker Mellanox Technologies Ltd. for $6.9 billion in March.
Until now, Infineon settled quietly on the sidelines. And it lost around a third of its value for the past year. The decline was due to European chipmaker revised its forecast twice to account for global economic concerns and weak Chinese car sales. Aside from that, Infineon’s offer values Cypress at approximately $8.7 billion. The figures are due to their outstanding shares, excluding the debt.
The plan of Infineon in purchasing Cypress can require tough integration work. It is due to the buyer concentrating on power chips and the aim on the Internet of Things and specialty memory.
Furthermore, Infineon gets about a quarter of its sales in China. As a result, the company turned into a headwind as the economy weakens. Also, it lacks stronger 2H sales to reach its 8 billion-euro sales guidance.
Chips and Other Products
Meanwhile, Infineon’s target design and produces flash memory chips and microcontrollers.
On the other hand, Cypress strives to reshape as a provider of chips used in vehicles and the developing market for the so-called internet of things.
Its automotive business expects to surge 8% to 12% over the coming five years. Aside from that, Cypress’ IoT unit to improve as much as 14% in the same period.