Infineon Technologies To Acquire International Rectifier For $3B In Cash

Infineon Technologies AG (FRA:IFXA), Germany’s largest semiconductor company, has agreed to acquire International Rectifier Corporation (NYSE:IRF) for about $3 billion in cash. The deal is expected to help Infineon strengthen its power-management business and increase its presence in the U.S.

Under the terms of the agreement, Infineon will pay $40 a share for El Segundo, California-based International Rectifier, which will represent a premium of about 47.7 percent over the average share price of International Rectifier in the last three months. The transaction, which is said to be the biggest in Infineon’s history, is expected to close later this year or in early 2015. The deal, which needs regulatory approval, will be funded using cash and 1.5 billion euros ($2 billion) of credit facilities, Infineon said.

“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,” Reinhard Ploss, CEO of Infineon Technologies, said in a statement on Wednesday.

Ploss, who was seeking a deal since he took the top job at Infineon in 2012, is hopeful about the growing demand of chips, particularly those used in car electronics and in mobile devices to manage battery power. Ploss also expects the deal to put Infineon closer to “the highly innovative region of California,” Bloomberg reported.

“International Rectifier has a strong presence in the US, the important center of innovation especially in the Connected World, and will also help to improve Infineon’s position in Asia,” Infineon said in a statement.

Although Infineon did not provide details about how much it would save on costs from the merger, Dominik Asam, Infineon's chief financial officer, said there could be job cuts at International Rectifier, which has administrative costs that are 4 percent higher than that of Infineon. In addition, there are also plans to manufacture some of International Rectifier products at Infineon’s existing facilities, according to Bloomberg.

According to the June-quarter results of International Rectifier, announced on Wednesday, the company’s revenue for the three-month period stood at $297.6 million, a 7.6 percent increase from $276.5 million in the same period in 2013.

Infineon grew its profit in each of the past four quarters, with its net cash reaching 2.1 billion euros ($2.8 billion) at the end of June. And, the German chipmaker also expects International Rectifier’s profits in the sector to catch up with its companywide target of 15 percent of earnings within two years of the deal’s completion.

Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) are financial advisers to Infineon on the acquisition and are also underwriters on the credit line. International Rectifier is being advised by JPMorgan Chase & Co. (NYSE:JPM).

On Wednesday, Infineon stock closed 2.46 percent lower at 8.41 euros in Frankfurt. International Rectifier closed 47.21 percent higher at $39.1 in New York.