ON Semi buys Fairchild for $2.4 billion, to boost power semi presence

November 19, 2015 // By Graham Prophet
In the latest move in a busy year for semiconductor company merger-and-acquisition activity, ON Semiconductor and Fairchild Semiconductor have agreed that ON will acquire Fairchild for $20.00 per share in an all cash transaction valued at approximately $2.4 billion.

The move is being seen as – at least – partly defensive: Infineon's acquisition of International Rectifier in January this year created a major player in the power semi space: STMicroelectronics, while not participating the M&A frenzy thus far, remains the other large presence in the sector. The agreed bid also takes Fairchild out of the reach of other possible bidders, including China's Tsinghua.

The acquisition creates, “a leader in the power semiconductor market with combined revenue of approximately $5 billion, diversified across multiple markets with a strategic focus on automotive, industrial and smartphone end markets,” the companies' statement continues.

ON Semiconductor anticipates achieving annual cost savings of $150 million within 18 months after closing the transaction. The overlap between the two companies' product lines is described as small relative to their overall turnover.

The statement continues, “ON Semiconductor intends to fund the transaction with cash from the combined companies balance sheet and $2.4 billion of new debt.”

This is understood to represent a three-fold increase of ON's overall debt.

This will be the second time in semiconductor history that the Fairchild name will have been absorbed; after being spun out of Fairchild Camera and Instrument as an industry pioneer in 1957, it was acquired by Schlumberger in 1979, then sold to National Semiconductor (now itself absorbed into Texas Instruments) in 1987. National retained the rights to the Fairchild name and re-created Fairchild Semi in 1997.

ON Semiconductor; www.onsemi.com

Fairchild; www.fairchildsemi.com