Business Wire IndiaInfineonTechnologies AG (FSE: IFX / OTCQX:IFNNY)announcedtoday the Closing of the acquisitionofCypressSemiconductorCorporation.TheSanJosé-basedcompany has become part ofInfineoneffective as oftheClosing.
“The acquisitionofCypress is a landmarkstep in Infineon’sstrategicdevelopment,” said Infineon CEO ReinhardPloss.“Together,we offer our customers theindustry’s most comprehensiveportfolio for linkingthe real with the digitalworld and shaping digitalization,oneof the most important globaltrends.
Weserve as a trusted partner for customers and distributorsandwe are evolvingfrom a leaderincomponents to a leaderinsystemsolutions for the automotive, industrial andIoTmarkets.Furthermore,customerscanbenefitfrom our increased global reach and enhanced design-in supporttailored to theirneeds.Wewelcome our new colleaguesfromCypress to Infineon.”
TheadditionofCypress lets Infineon further strengthen its focuson structural growthdrivers and on a broaderrangeofapplications. This will accelerate thecompany’spathofprofitablegrowth.Cypress adds a differentiatedportfolioofmicrocontrollers,connectivitycomponents,software ecosystems andhigh-performancememories. All this is highlycomplementary to Infineon’s leading powersemiconductors,automotivemicrocontrollers, sensors and securitysolutions.Combiningthesetechnologyassetsenablesadvanced solutions for high-growthapplications such as ADAS/AD,IoTand5G mobile infrastructure. The additionofCypress’ strong R&D capabilitiesand its foothold in theU.S.andJapanstrengthen Infineon’sconnectionswithcustomersaroundtheworld.
Financialrationale of the merger confirmed
On 3 June 2019, InfineonandCypressannouncedthatthecompanieshadsigned a definitiveagreementunderwhich Infineon wouldacquireCypress for US$23.85 per share in cash,corresponding to an enterprisevalueof€9.0 billion. The transactionhasbeenapproved by the Cypress shareholders and all requiredregulatory clearances havebeenobtained.
Theacquisition is expectedtobeaccretive to earnings in the2021fiscalyear. The profitability is expected to risewhilecapitalintensityofthecombinedbusinesswilldecrease,increasing free cashflow.Weexpectannualcostsynergiesof€180 million graduallyramping up overapproximately three years after Closing. The complementary portfolios will enable theofferingofadditional chip solutions with a revenuesynergy potential of more than€1.5 billion per annum in the long term.
Theacquisitionmakes Infineon one of the world's top 10 semiconductormanufacturers.Already a leader inpowersemiconductorsandsecurity controllers, Infineon is now also becoming thenumberonesemiconductorsupplier to theautomotiveindustry.
Stable and long-term refinancing structure
Theacquisition is initially funded through a combinationofcash on hand and a committedacquisition financing facility provided by a consortium of 20 national and internationalbanks.With maturitiesranging from March 2022untilJune2024 for individualtranches, the acquisition facility provides ample timeandflexibilityforlong-termrefinancingmeasurestoarrive at thetargetcapital structure. Infineon is committedtoretaining an investmentgraderating and therefore,unchangedfrom the initialannouncement,Infineonintendstoultimately finance approximately 30 percent of the totaltransactionwithequity.Withtheshareplacementandthe issuance of the hybridbond in 2019Infineon has alreadydonesignificantstepstowardsachieving the desired quantum. Givencurrent macro uncertaintiescaused by the coronavirus pandemic, a solid balance sheet and a strong liquidity position are key. To thisend,Infineonwill keep liquiditycorresponding to its targetlevel of €1 billion plus at least10 percent ofsales.Furthermore, a consistentdeleveraging path will be pursued in order to bring the ratio ofgross financial debt to EBITDA back to its targetvalueofmaximum2.0xover the mid-term.