ON Semiconductor Corp said it would buy Fairchild Semiconductor global Inc in a US$2.4 billion deal, the latest in a rapidly consolidating semiconductor industry.
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Fairchild’s shares jumped 9.4% to reach $19.56 on the news, which was below ON Semi’s $20 offer price.
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The transaction will help ON Semiconductor to expand its semiconductor segment, which manufactures chips to enhance power effectiveness in products ranging from automobiles to appliances.
Chief Executive Officer, Keith Jackson said during the conference call that there is little product and revenue overlap between both the companies.
Fairchild traces its storied history back to 1957, when the “Traitorous Eight” group of Gordon Moore, Robert Noyce, Eugene Kleiner, Jay Last, C. Sheldon Roberts, Victor Grinich, Julius Blank, and Jean Hoerni defected from Shockley Semiconductor to start a new company focused on the production of silicon transistors.
Since its founding, Fairchild Semiconductor has been acquired twice (first by Schlumberger Limited in 1979, then by National Semiconductor in 1987) and re-launched in 1997 as an independent company. The company expects to achieve annual cost savings of Dollars 150 million within 18 months of closing the transaction.
The acquisition, which will create a company with a turnover of around $5bn a year, is expected to be completed by the middle of 2016. The company earned $342 million during the quarter, compared to the consensus estimate of $344.63 million.
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Deutsche Bank is acting as the lead financial advisor to ON Semiconductor, and Morrison & Foerster served as legal advisor to ON Semiconductor. Goldman Sachs acted as exclusive financial advisor to Fairchild, along with Wachtell, Lipton, Rosen & Katz, who served as legal advisor.
