Infineon Technologies AG and Cypress Semiconductor Corp. announced yesterday (June 3) that the two parties have signed a definitive agreement. Infineon will acquire Cypress for $23.85 per share in cash, with a total corporate value of 9 billion.
Infineon CEO Reinhard Ploss said: "The planned acquisition of Cypress is a milestone in the strategic development of Infineon. We will strengthen and enhance the company's profit growth rate and expand the business to a broader level. Through this transaction, we will be able to provide our customers with the most comprehensive product portfolio, connect the real world and the digital world, and open up new growth potential in the automotive, industrial and Internet of Things sectors. This transaction will also make the company's business model more resilient. We welcome Cypress's colleagues to join Infineon to work together on our commitment to innovation and focus on R&D to accelerate technological advancement."
Cypress President and CEO Hassane El-Khoury said: "The Cypress team is pleased to team up with Infineon to find the tens of decades in the next wave of technology that have brought about a significant increase in connectivity and computing demand. The opportunity of billions of dollars. Today's announcement not only proves the strength of our team to provide leading industry solutions in the world, but also reflects the vision that our two outstanding companies can work together to achieve a safer and more seamless combination. Connections, as well as more complete hardware and software solutions and products, strengthen customers' products and technologies to better serve their end markets. In addition, the two companies' businesses match very well and will bring more benefits to customers and employees. More and better opportunities."
Cypress Chairman Steve Albrecht said: "In the past three years, Cypress has achieved great results through the 3.0 strategy and has undergone corporate restructuring to focus on key markets. After receiving the acquisition intentions of many companies, we The deal with Infineon is a recognition of the Cypress team's strategy and unremitting efforts. For Cypress shareholders, the closing dividend and the cash price of $23.85 per share will be It brings significant benefits. In the highly competitive automotive, industrial and consumer markets, the acquisition will also create increasingly critical product opportunities for the industry. As a member of the board of directors, we are grateful for the outstanding leadership under Hassan El-Khoury. Cypress management team."
Lay a stronger position in high growth markets
After the acquisition of Cypress, Infineon will strengthen the core of promoting structural growth and apply the company's technology to a wider range of areas. This will accelerate the foundation for strengthening the company's profit growth in recent years. Cypress has a differentiated portfolio of microcontrollers, software and connectivity components that complements Infineon's leading power semiconductor, sensor and security solutions. Combining the technical assets of both parties will provide a more comprehensive and advanced solution for high-growth applications such as electric motors, battery-powered devices and power supplies. Infineon's security expertise combined with Cypress's connectivity technology will enable the company to accelerate its entry into new IoT applications in the industrial and consumer markets. In automotive semiconductors, the expanded combination of microcontrollers and NOR flash memory will offer great potential, especially in the application of advanced driver assistance systems and new automotive electronic architectures.
Through Cypress's strong R&D capabilities and its presence in the US market, Infineon not only enhances the services and products offered to key local customers in North America, but also enhances its strength in other important regions. The company will acquire R&D in Silicon Valley and expand its presence and market share in strategically focused markets in Japan. At the same time, Infineon hopes to make the company's business model more resilient by achieving huge economies of scale. Based on the 2018 euro test preparation revenue of 10 billion euros, this transaction will make Infineon the world's eighth largest chip maker. Based on the world's leading power semiconductors and safety controllers, Infineon will become the leading chip supplier in the automotive electronics market.
Financial strength has improved with full integration
The acquisition will enhance Infineon’s financial strength and it is expected that Infineon’s shareholders will benefit from the profit growth achieved in the first full fiscal year following the completion of the transaction. Capital density will fall and free cash flow ratio will increase. Infineon has conducted proven sales and cost synergies for this transaction in due diligence. It is expected that by 2022, the expected economies of scale will create cost synergies of 180 million euros per year. The complementary product portfolio will provide more chip solutions, and the potential revenue synergies in the long run are expected to exceed 1.5 billion euros per year.
As the business is successfully integrated, Infineon will adjust its target operating model accordingly. The company's targets will include: full-cycle revenue growth of more than 9%, revenue margin of 19%, investment and sales ratio will be reduced to 13%.
