ON Semiconductor to acquire Fairchild Semiconductor in $2.4-bn deal

ON Semiconductor, a Phoenix, Arizona-based company, is acquiring rival chipmaker Fairchild Semiconductor, with around 650 employees and based in Maine, for around $2.4 billion.

ON Semiconductor is acquiring competitor Fairchild using mostly borrowed funds.

The combined companies would overlap in certain product areas. Both companies make chips that control power supplies, however, Keith Jackson, ON Semiconductors' president and chief executive officer, said in a conference call yesterday that the overlap being ''minimal'' the product lines would complement each other.

''Even though the two companies have complementary product portfolios, they serve similar end markets and a similar set of customers in similar geographies,'' Jackson said. ''There is a lot of commonality between the manufacturing and logistics operations of the two companies.''

However, according to an industry analyst, he did not think Fairchild brought a lot to the transaction.

According to Stephan Ohr, a semiconductor analyst for Gartner, if the chip market continued to contract, the company officials would be more likely to close an older plant, www.pressherald.com reported.

''There is not a lot that Fairchild can offer right now,'' Ohr said.

Fairchild investors will receive $20 a share - a 30 to 40 per cent premium over Fairchild's share price in recent months, before the sale prospect became public.

Jackson said in a conference call that the deal will create "a premier power and analog semiconductor company" with $5 billion revenue, making it one of the top 10 non-memory chip companies worldwide.

The $2.4 billion cash deal comes as the latest in a string of mergers and acquisitions in the semiconductor industry, with 2015 setting a record even before the year ended for the dollar value of deals.

Dealogic said there had been just over $118 billion in pending and completed deals this year, driven in part by two big deals, the $37 billion acquisition of Broadcom by Avago Technologies and Intel's $16.7 billion purchase of Altera.

According to another Gartner analyst Mark Hung, smaller to medium-size chip companies like ON and Fairchild needed to combine as they were "stuck in the middle" between innovative startups and giants like Intel that offered broader product portfolios, San Jose Mercury News reported.