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Infineon To Acquire Cypress Semiconductor In A $10 Billion Deal

Infineon To Acquire Cypress Semiconductor In A $10 Billion Deal
The chip maker Cypress Semiconductor has been agreed to be bought by Infineon Technologies in a deal in which the chip maker would be valued at $10 billion.
In addition to continuing its dividend through closing, Infineon has decided to pay $23.85 per share in cash ($10 billion enterprise value, counting debt). The share price being agreed at is 55 per cent higher than the price of the stocks that was marked last week before the news of the acquisition started to filter out.
This deal is reflective of the tendency with the global chip industry towards consolidation of the chip industry. This trend has seen many of the Silicon Valley companies – ranging from Altera to NXP, being acquired and that trend is apparently continuing.
For Cypress, the stock price is at an all time high and many analysts are of the view that this price of the legendary Silicon Valley firm stocks at merger is just apt.
A very well known chip engineer T.J. Rodgers had founded Cypress back in 1982. Rodgers was instrumental in guiding Cypress from a small venture that occasionally manufactured high tech products to a company that was considered to be highly skilled manufacturer of the wide range of memory sensors and Internet of Things chips.
Rodgers is also known to be among the first few to foresee the future potential of improved solar cells made from silicon and this made him invest in SunPower in 2002. The company later also was guided by Rodgers to go public and make an initial public offering in 2005. Cypress got a big return on that deal.
The company on the other hand apparently was known more for its larger-than-life founder who is known to have said outrageous things such as like “real men have fabs” and was yet considered to be a fiercely independent libertarian and a smart businessman. According to Rodgers, he was a staunch believer that companies can gain success in the semiconductor industry only by having their own factories when it can to fabs, or wafer fabrication plants or chip factories. Rodgers left Cypress in 2016 but he continued to remain as an activist shareholder within Cypress.
Following the announcement of the deal, Infineon CEO Reinhard Ploss said: “It’s a proud price, no doubt,” said Infineon CEO Reinhard Ploss. “From our point of view it was an acceptable price, and if you look at the synergies, it represents an additional gain in value,” Ploss told reporters on a conference call.
Interest expressed in Cypress by another unidentified party was the trigger for discussions for acquisition, said Chief Marketing Officer Helmut Gassel. It was about five weeks ago that Cypress invited Infineon to be a part of the acquisition process.
However, investors of Infineon were not very fond of the deal as the stocks of the company fell by almost 8 per cent as concerns of overpaying for the deal struck investors. 30 only 30 per cent of the deal would be financed through equity and the rest in debt. On the other hand, there was 27 per cent spike in the shares of Cypress to $22.74 which was lower than the per share offer by Infineon.

Christopher J. Mitchell

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