Shares of German chipmaker Infineon Technologies AG (IFNNY) rose around 2% on Jan 14 during the trading session on the NYSE, following completion of the acquisition of International Rectifier Corp. The buyout of this El Segundo, CA-based company strengthens Infineon’s position in the power semiconductors industry.
Infineon stated its decision to buy International Rectifier on Aug 20, for $3 billion in an all cash deal. The board of both companies approved the deal, with International Rectifier shareholders casting 99.5% votes in majority. As per the deal terms, Infineon bought the U.S. firm for $40 a share, which represented a fully diluted enterprise value of roughly $2.4 billion. Hence, effective Jan 13, International Rectifier has become a part of Infineon.
International Rectifier dealt in power-efficient electrical components for devices including satellites, cars, aircrafts and lighting systems. Therefore, its product line is a perfect complement to Infineon’s existing power management business. The acquisition will also help Infineon expand to important international markets, particularly North America and Asia.
Hence, Infineon anticipates the acquisition to be immediately accretive to its earnings. Moreover, the company expects International Rectifier’s margin contribution to be at least in line with its average-cycle margin target of 15% by fiscal year 2017. Also, the company expects the buyout to be further accretive to its financials fueled by International Rectifier’s ongoing streamlining efforts.
Of late, Infineon has been focusing on boosting its prowess in the power semiconductors industry by capitalizing on opportunistic deals. Last month, the company extended its manufacturing partnership with United Microelectronics Corporation (UMC) to develop power semiconductors for automotive applications (read more: Infineon and United Microelectronics to Extend Partnership). The partnership extension places the two companies quite well to gain from the growing automotive semiconductor market.
However, Infineon currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Ambarella, Inc. (AMBA) and Avago Technologies Ltd. (AVGO). Both the companies sport a Zacks Rank #1 (Strong Buy).
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