ON Semi decides on Sanyo

ON Semiconductor has agreed to buy Sanyo Electric’s loss-making semiconductor operation for approximately $366m in cash and stock.

Based on the most recently completed quarter, Sanyo Semiconductor’s annualised revenue was approximately $1.2bn and the annualised revenue of the combined entity would be approximately $3.5bn. The operation made a loss of about $80m in the past year, which pushed the parent, which is majority owned by Panasonic, into loss.

ON said it expects the acquisition to be completed before the end of 2010, claiming that Sanyo brings complementary products. The company claimed it could see significant efficiency gains by streamlining manufacturing.

“The pending acquisition of SANYO Semiconductor is another significant step by ON Semiconductor to solidify its position as a premier global supplier of high-performance, energy efficient silicon solutions with increased manufacturing scale and an expanded addressable market,” said Keith Jackson, president and CEO of ON. “By combining these two highly complementary businesses, we will be better positioned to capture growth on a global scale. Strategically, this acquisition is expected to provide us with increased access to an important part of the global semiconductor market - the Japanese market, where Sanyo Semiconductor has a more than 50 year operating history, and a longstanding presence at leading electronics manufacturers.”
 
The acquisition will provide ON with a portfolio of microcontrollers and application specific integrated circuits (ASICs).
 
“Having completed seven acquisitions, ON Semiconductor has a proven track record of successfully integrating acquired businesses, and realising manufacturing and operational efficiencies,” Jackson claimed. “While ON Semiconductor has had a manufacturing and sales presence in Japan for more than a decade, this acquisition is an exciting move on our part to wholeheartedly enter the Japanese market.”

Teruo Tabata, president of Sanyo Semiconductor, said: “There will be no change in the strategy as far as technology is concerned, as both companies specialise in analogue technology.”
 
Although the acquisition is subject to closing conditions and regulatory approvals, the companies expect the transaction to close before the end of 2010.
 
Donald Colvin, ON’s executive vice president and CFO, said: “Although semiconductor valuations are currently depressed, we believe we have acquired the business for an agreeable price, with negligible dilutive impact to ON Semiconductor in the near term, and do not foresee the need for additional debt financing at this time. Sanyo Semiconductor operates at approximately break-even today. Based on current revenue run rates, our goal is to deliver in excess of $30m in pre-tax income on a quarterly basis from Sanyo Semiconductor approximately 18 months after closing the transaction.”

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