Fairchild Semiconductor International Inc. FCS acknowledged receiving a revised unsolicited acquisition proposal from an undisclosed party, a fortnight after it rejected an earlier bid from the same party in favour of a merger with Phoenix-based ON Semiconductor Corp. ON.
The bidder is identified as "Party G" in SEC documents. However, according to Bloomberg, the bid was made by a group led by China Resources Holding Co. and Hua Capital Management.
The unsolicited bidder has modified some terms of its offer for Fairchild in an attempt to win over the target’s board, according to a person familiar with the discussions.
The bidder is still offering Fairchild $21.70 per share in cash, the same as its original offer. This stands against Fairchild’s Nov 18 all-cash deal with ON Semiconductor for $20 per share. The group’s acquisition proposal values Fairchild almost 9% higher than ON Semiconductor.
Per the filing, in the revised proposal, the unsolicited bidder has offered to reimburse the $72 million that Fairchild would owe ON Semiconductor as a termination fee, in case it called off their merger. Furthermore, it has also given a debt commitment letter from JPMorgan Chase & Co.
Fairchild’s board of directors issued a statement saying that it will review and consider the revised 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 will 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 various markets with a strategic focus on smartphone, automotive and industrial end markets.
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 Silicon Laboratories Inc. SLAB and MaxLinear, Inc. MXL, both sporting a Zacks Rank #1 (Strong Buy).
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