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Breakingviews: Infineon's $3 bln buy

Thursday, August 21, 2014 - 03:55

Infineon is paying a 48 percent premium for International Rectifier. The fit is complementary; its U.S. peer's chips use less power than Infineon products. But top-notch execution is required.

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German chipmaker infineon has made its biggest ever acquisition oft buying. According to its CFO bunch of targets. But does it make sense don't Adalius. With breaking views has been has been looking through the numbers have. What do you think -- on paper and it's a big premium they pay it on paper they -- it makes it. Absolute deal -- if you take the price south of the equation for a second because. You what's effectively International Rectifier does is it dominates the market where it's always big into the market for low power. Transistors and switches so this is the sort of stuff that you might needs for the palm Paula washing machine role for industrial use something that. You know -- stood. -- you know I kind of a -- power. Products to bridging east you know low power on the semiconductor. -- technologies and a a high power. Operating. Performance. Whereas actually what you call -- for infinity on. It's something that consumes a lot more power it sort of stuffy script calls to pick and it acts -- excitement is these these things take. More power on the him on the transistor size. Hasn't been looking for wanting to -- -- -- let's just get the history it was it was spun off from Siemens back in 99 -- fifteen years ago. It -- A lot of big take care of us. In in the intervening period but suddenly it. Ounces less Ryan a minute or that I can really remember that it it's done was to spinoff. Paul today it's division to have something to Intel up well for five years ago I say. It hasn't really been acquisitive handle this cash sitting on his father -- two billion dollars and excited and it's a year is gonna use our program about half of the outside that's very about one and a half billion site. You'll be left with a little bit of cash the resting for announced that we. Some credit facilities provided by what Bank of America Merrill Lynch. I'm Citigroup but effectively is still -- -- -- a bit of cash left. So you know it's it's net debt position wanted to bounce. Until you know I guess invest this thing. Right but it's all about the price. Yes I'm. It's all about the price and as a -- as you say to rich 48 cent premium. They paste. I think infineon says it down a little bit of course rectify. That that there. But back to this back to this point you wind and made this move now yes I have -- two billion of cash you think it was -- -- -- visit -- either gonna spend this cash or ten. In the show us what I think. It's particular on this gives them I mean they've given some numbers themselves but this puts them into a clear leading position. In the so called semiconductor poem Walcott this is. This basically means you know. Anything that requires switches to -- tentative -- operates like a fridge that needs to adjust its temperature. Frequently we'll use this social -- on -- I'm it was Ortiz -- -- when in -- but not by very clear mountain maybe two percentage points over. It was Toshiba whoever it was that was number two now it's called sort of at least an eight percentage point. -- so it's become the clear leader in the small -- This is a natural -- it's. Did the issue I think is that. What you goal with International Rectifier is a company that has just managed. Through -- time around to get its profit margin uptick. About eight to sentence is gonna get it up to 15% which is Waltz the target teens four. Infinity on us quite a big loss so we'll have to see. If they can manage to do not over the next couple it is very good to -- many things that don't get your breaking news the US shares on the told that he systems and petty BST. IMAX trouble this is crisis.

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Breakingviews: Infineon's $3 bln buy

Thursday, August 21, 2014 - 03:55