After announcing a definitive merger agreement with ON Semiconductor Corp. ON last month, semiconductor maker Fairchild Semiconductor International Inc. FCS acknowledged receiving an unsolicited acquisition proposal that values Fairchild almost 9% higher than ON Semiconductor. Shares of Fairchild rose 1% in the trading session following the announcement.
The undisclosed buyer offered Fairchild $21.70 per share in cash. This stands against the Nov 18 all-cash deal with ON Semiconductor for $20 per share, which valued Fairchild at about $2.4 billion.
Fairchild’s board of directors issued a statement saying that it will review and consider the proposal. However, the company asserted that it remains subject to the merger agreement with ON Semiconductor and maintains its recommendation in support of the said merger.
Based in San Jose, CA, Fairchild has been struggling in the recent quarters, hurt by weaker demand from the telecom sector, and mobile and appliance customers. The company moved to cut jobs and reduce some manufacturing operations in order to cut costs last year.
Last month, ON Semiconductor inked a deal to buy Fairchild for $2.4 billion. The offer came a month after Fairchild said it was hunting for a buyer and was in talks with potential suitors including Infineon Technologies AG and ON Semiconductor.
The acquisition is set to create a leader in the power semiconductor space, as the merged entity will boast combined revenues of roughly $5 billion, and will be diversified across diverse markets with a strategic focus on smartphone, automotive and industrial end markets.
On the other hand, Fairchild is bound to pay ON Semiconductor $72 million in termination fees if it chooses another buyer and scraps the deal, per a recent regulatory filing.
The unsolicited bid is the latest example of rising bids and drawn-out skirmishes in the semiconductor space. The rapidly-consolidating industry has seen an astonishing $110 billion in deals this year, as companies merge to battle mounting costs of production, slowing growth and a shrivelling customer list.
At present, Fairchild carries a Zacks Rank #3 (Hold), while ON Semiconductor holds a Zacks Rank #4 (Sell). A couple of other stocks that look promising in the semiconductor space include Texas Instruments Inc. TXN and MaxLinear, Inc. MXL, both sporting a Zacks Rank #1 (Strong Buy).
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