German chipmaker Infineon to acquire International Rectifier for $3 bn

In its biggest-ever acquisition, German chipmaker Infineon today said it is acquiring California-based International Rectifier for about $3 billion in cash.

Under the terms the company would pay $40 per share for the US company, which makes power-management circuits that find applications in everything from computers to appliances, automobiles, lighting and aircraft.

The purchase price represents a fully diluted enterprise value of approximately $2.4 billion. The transaction price represents a premium of approximately 48 per cent over the average share price of International Rectifier during the last three months and a premium of approximately 51 percent over the closing share price of International Rectifier on August 19, 2014.

Infineon will fund the transaction using cash-on-hand and fully underwritten credit facilities of €1.5 billion. Upon closing of the transaction, Infineon's capital structure should stay well within the previously communicated targets of 30 to 40 pe rcent gross cash-to-revenue, no more than 2x gross debt-to-EBITDA and a positive net cash position.

Infineon's and International Rectifier's product portfolios are highly complementary. International Rectifier's expertise in low-power, energy-efficient IGBTs and Intelligent Power Modules, Power MOSFETs and Digital Power Management ICs will integrate well with Infineon's offering in power devices and modules.

Shares of International Rectifier were up as  high as $39.50 on the news. Infineon shares were down 1.72 per cent in after-hours trade on the Frankfurt exchange. The stock was down 1.38 per cent ahead of the announcement, while those of several possible targets, including International Rectifier rose, after reports that Infineon was preparing to acquire a US chipmaker.

Infineon, whose chips power car airbags, enable cruise control, manage power supplies and cut vehicle emissions, rebuffed major takeovers after it was spun off from engineering conglomerate Siemens in 1999.

The company later struggled to turn around its failing memory-chip business, which it then disposed of.

According to Infineon the merger would complement its own range of high-powered chips with International Rectifier's low-power, energy efficient chips. Infineon added, its combined market share of the fragmented power semiconductor market would grow to 17.2 per cent from 11.8 per cent as a standalone company, based on 2012 revenue figures.

In a statement,  Dr Reinhard Ploss, CEO, Infineon Technologies AG, said, ''The acquisition of International Rectifier is a unique opportunity. With their great knowledge of specific customer needs and their application understanding, International Rectifier employees will contribute to Infineon's strategic development from product thinking to system understanding and system solutions. The combination of Infineon's and International Rectifier's products, technological and innovative excellence, as well as distributional strength will unleash great potential.''

The acquisition combines two semiconductor companies with leadership positions in power management technology. By the integration of International Rectifier, Infineon complements its offerings and will be able to provide customers with an even broader range of innovative products and services. Infineon will also benefit significantly from greater economies of scale as well as a larger regional footprint.

Oleg Khaykin, president and CEO of International Rectifier, said, ''This transaction provides significant value to our stockholders and opens new strategic opportunities for both our customers and employees. By combining two complementary providers in power management solutions, International Rectifier will benefit from Infineon's products and technologies, manufacturing and operational excellence and greater R&D scale.''

The transaction has been approved by the Board of Directors of International Rectifier and  Infineon's Supervisory Board.

The closing of the transaction is subject to regulatory approvals in various jurisdictions and customary closing conditions, as well as approval of International Rectifier stockholders.

The transaction is likely to close late in the calendar year 2014 or early in the calendar year 2015 subject to regulatory approval.