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20 August 2014

Infineon to acquire International Rectifier for $3bn

Infineon Technologies AG of Munich, Germany has signed a definitive agreement to acquire International Rectifier Corp (IR) of El Segundo, CA, USA for $40 per share in cash (totalling about $3bn), representing a premium of 48% over IR’s average share price during the last three months and a premium of 51% over the closing share price on 19 August.

Infineon will fund the transaction using cash-on-hand and fully underwritten credit facilities of Euro 1.5bn in total (fully underwritten by Bank of America Merrill Lynch International Ltd and Citigroup Global Markets Ltd, who are also acting as financial advisors). Upon closing of the transaction, Infineon’s capital structure should stay well within the previously communicated targets of 30-40% gross cash-to-revenue, no more than 2x gross debt-to-EBITDA and a positive net cash position.

The acquisition combines two semiconductor firms with what are claimed to be leadership positions in power management technology. By integrating International Rectifier, Infineon complements its offerings and will be able to provide a broader range of products and services.

Infineon’s and International Rectifier’s product portfolios are reckoned to be highly complementary. IR’s expertise in low-power, energy-efficient IGBTs and intelligent power modules, power MOSFETs and digital power management ICs will integrate with Infineon’s range of power devices and modules.

With IR, Infineon acquires a manufacturer of gallium nitride on silicon (GaN-on-Si)-based power semiconductors. It is reckoned that the combination will accelerate Infineon’s position in GaN discretes and GaN system solutions, improving its ability to pursue a strategically important technology platform with significant future growth potential.

The transaction will result in a broad range of products creating what is described as a comprehensive provider of silicon-, silicon carbide (SiC) and gallium nitride (GaN)-based power devices and integrated circuits. Infineon believes that the increase in exposure to the distribution channel will allow it to meet the needs of a broader range of customers.

The integration of IR should generate economies of scale through optimization of the combined entity’s operating expense structure and through acceleration of the ramp-up of Infineon’s 300mm thin wafer manufacturing capability.

Infineon says that it will also have a much broader and stronger regional scope. IR has a strong presence in the USA and will also help to improve Infineon’s position in Asia. Infineon believes that the increase in exposure to the distribution channel should allow it to meet the needs of a broader range of customers.

“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,” says Infineon’s CEO Dr Reinhard Ploss. “The combination of Infineon’s and International Rectifier’s products, technological and innovative excellence, as well as distributional strength will unleash great potential,” he reckons.

“This transaction provides significant value to our stockholders and opens new strategic opportunities for both our customers and employees,” says International Rectifier’s president & CEO Oleg Khaykin. “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.”

International Rectifier’s board of directors and Infineon’s supervisory board have approved the transaction. Subject to regulatory approvals in various jurisdictions and customary closing conditions (as well as the approval of International Rectifier’s stockholders), the transaction is expected to close late in 2014 or early in 2015.

The acquisition is expected to be accretive to pro-forma earnings per share (EPS) within the first fiscal year of closing. Synergies are expected to drive significant accretion going forward, building on International Rectifier’s existing successful operational restructuring. In the second full fiscal year of operation after closing, International Rectifier’s margin contribution is expected to be at least in line with Infineon’s target of 15% segment result margin over the cycle. As such, Infineon maintains its target of 15% average-cycle segment result margin.

Tags: Infineon International Rectifier GaN-on-silicon

Visit: www.irf.com

Visit: www.infineon.com

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