Wednesday 19 June 2019

Infineon to buy Cypress for €7.7bn cash in latest chip maker mega-deal

Reinhard Ploss, CEO of German semiconductor manufacturer Infineon. Photo: REUTERS/Michael Dalder/File Photo
Reinhard Ploss, CEO of German semiconductor manufacturer Infineon. Photo: REUTERS/Michael Dalder/File Photo

Liana Baker, Ian King and Ed Hammond

Germany's Infineon Technologies has agreed to buy California's Cypress Semiconductor Corp for about $8.7bn (€7.7bn) in cash, the latest mega-deal for an industry grappling with slowing growth.

The $23.85-a-share offer is a 34pc premium to Cypress's Friday close, and 50pc above the price the stock was trading at on May 29, when takeover interest was revealed. Including debt, the deal values Cypress at €9bn.

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Buying Cypress will hand Infineon a memory chip maker re-positioning itself as a provider to cars and other connected devices.

The semiconductor industry has been reshaped over the past five years as companies combine to gain scale while fighting rising costs and shrinking customer bases. NXP Semiconductors recently announced a $1.76bn deal for Marvell's wifi connectivity business, while Nvidia agreed to buy chipmaker Mellanox for $6.9bn.

Cypress shares were trading at $22.05 premarket in New York, below the offer price. Infineon fell as much as 7.1pc in Frankfurt to its lowest level since November 2016. It's lost almost a third of its value over the past year, as it twice revised its forecasts to account for global economic uncertainty and a slowdown in Chinese car sales. Infineon's plans may result in some arduous integration work, with the buyer focused on power chips and the Internet of Things and specialty memory. Infineon makes a quarter of its sales in China, which has turned into a headwind as the economy slows. It will need stronger 2H sales to meet its €8bn sales guidance.

Cypress has been trying to recast itself as a provider of chips for use in vehicles and the growing market for so-called internet of things.

It remains to be seen whether Infineon can win the necessary regulatory approvals in the midst of escalating trade battles.

Bloomberg

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