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On Semiconductor To Acquire Fairchild Semiconductor For $2.4 Billion In Cash

The following excerpt is from the company's SEC filing.

Acquisition to create a global leader in the power semiconductor market

Key Transaction Highlights:

Creates a leader in the power semiconductor market with a broad and deep product portfolio

Highly complementary product lines offering the full spectrum of high, medium and low voltage products

Strengthens presence in key strategic areas industrial, automotive and smartphone end markets

Immediately accretive to non-GAAP earnings per share and free cash flow

Expect significant accretion to non-GAAP EPS within a few quarters post close

Clear line of sight to $1 50 million in annual cost savings within 18 months of the transaction close

ON Semiconductor Corporation (Nasdaq:

) (ON Semiconductor) and Fairchild Semiconductor International Inc. (Nasdaq:

) (Fairchild) today announced that they have entered into a definitive agreement for ON Semiconductor to acquire Fairchild for $20.00 per share in an all cash transaction valued at approximately $2.4 billion. The acquisition creates a leader in the power semiconductor market with combined revenue of approximately $5 billion, diversified across multiple markets with a strategic focus on automotive, industrial and smartphone end markets.

The combination of ON Semiconductor and Fairchild creates a power semiconductor leader with strong capabilities in a rapidly consolidating semiconductor industry. Our plan is to bring together two companies with complementary product lines to offer customers the full spectrum of high, medium and low voltage products, said Keith Jackson, president and chief executive officer of ON Semiconductor. The immediate EPS accretion and potential to significantly augment ON Semiconductors free cash flow, make the Fairchild acquisition an excellent opportunity for ON Semiconductor stockholders.

As part of ON Semiconductor, Fairchild will continue to pioneer technology and design innovation in efficient energy consumption to help our customers achieve success and drive value for our partners and employees around the world, stated Mark Thompson, chairman and chief executive officer of Fairchild. We look forward to working closely with the ON Semiconductor team to ensure a smooth transition.

Following consummation, the transaction is expected to be immediately accretive to ON Semiconductors non-GAAP earnings per share and free cash flow, excluding any non-recurring acquisition related charges, the fair value step-up inventory amortization, and amortization of acquired intangibles. ON Semiconductor anticipates achieving annual cost savings of $150 million within 18 months after closing the transaction.

$5 billion in revenue is based on the last twelve months revenue of the two companies.

ON Semiconductor to Acquire Fairchild Semiconductor

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The transaction is not subject to a financing condition. ON Semiconductor intends to fund the transaction with cash from the combined companies balance sheet and $2.4 billion of new debt. The debt financing commitment also includes provisions for a $300 million revolving credit facility which will be undrawn at close. ON Semiconductor remains committed to its share repurchase program, and the agreed upon financing provides flexibility to continue share repurchases going forward.

Tender Offer and Closing

Under the terms of the definitive agreement ON Semiconductor will commence a cash tender offer to acquire Fairchilds outstanding shares of common stock for $20.00 per share, net to each holder in cash. Following receipt of required regulatory approvals and the satisfaction of other customary closing conditions, and after such time as all shares tendered in the tender offer are accepted for payment, the definitive agreement provides for the parties to effect, as promptly as practicable, a merger which would result in all shares not tendered in the tender offer being converted into the right to receive $20.00 per share in cash. The transaction has been unanimously approved by ON Semiconductors and Fairchilds boards of directors and is expected to close late in the second quarter of 2016...