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Infineon announces 9 billion euros (approximately 10.1 billion US dollars) acquisition of Cypress Semiconductor

Infineon CEO Ploss said: "This is a milestone step in the strategic development of Infineon. We will be able to provide the most comprehensive product portfolio that connects the real and digital world."
The advantages of both parties are highly complementary in terms of technology, which will further expand our market potential in high-growth markets such as automobiles, industry and the Internet of Things.
Infineon will acquire Cypress for USD 23.85 per share, with a total value of 9 billion Euros.
By the end of 2022, the acquisition transaction will generate an annual cost synergy effect of 180 million euros; in the long run, the annual revenue synergy will reach 1.5 billion euros.
The transaction is expected to be completed by the end of 2019 or early 2020; it is expected to bring profit growth in the first full fiscal year after the transaction is completed.
Future target operating model after the integration is completed: revenue growth of more than 9%, operating profit margin of 19% and investment-to-sales ratio of 13%.
Infineon Technologies AG and Cypress Semiconductor announced today that the two parties have signed a definitive agreement. Infineon will acquire Cypress for USD 23.85 per share in cash, with a total enterprise value of 9 billion euros.
Infineon CEO Reinhard Ploss said: "The planned acquisition of Cypress is a landmark step in Infineon's strategic development. We will strengthen and increase the company's profitability growth rate and expand the business to a broader level. Through this transaction, we will be able to provide customers with the most comprehensive product portfolio, connect the real and digital worlds, and explore new growth potential in the automotive, industrial and Internet of Things fields. This transaction will also make the company's business model more resilient. We We welcome Cypress colleagues to join Infineon and work together to commit ourselves to our consistent commitment to innovation and focus on R&D to accelerate technological progress."
Cypress President and CEO Hassane El-Khoury said: "The Cypress team is very pleased to join forces with Infineon to find dozens of significant increases in connectivity and computing requirements in the next wave of technology. The opportunity of billions of dollars. Today’s announcement not only proves our team’s ability to provide leading industry solutions globally, but also reflects the vision that our two outstanding companies can achieve together. The combination of the two parties will provide more security and seamless The connection of the two companies, as well as more complete hardware and software solutions and products, strengthen customers’ products and technologies to better serve their end markets. In addition, the two companies’ businesses are very matched, which will bring more to customers and employees And better opportunities."
Cypress Chairman of the Board of Directors Steve Albrecht said: "In the past three years, Cypress has achieved great results through the 3.0 strategy and has undergone corporate restructuring to focus on key markets. After receiving acquisition intentions from multiple companies, we The deal with Infineon is a recognition of Cypress’s team’s strategy and unremitting efforts. For Cypress’s shareholders, the continued dividend after the completion of the acquisition plus the cash price of US$23.85 per share, It will bring significant benefits to it. In the highly competitive automotive, industrial and consumer markets, the acquisition will also create an increasingly critical product opportunity for the industry. As a member of the board of directors, we are very grateful for the leadership of Hassane El-Khoury Excellent Cypress management team."
Establish a stronger position in the high-growth market
After the acquisition of Cypress, Infineon will strengthen the core of promoting structural growth and apply the company's technology to a wider range of fields. This will accelerate the strengthening of the company's foundation for profit growth in recent years. Cypress has a differentiated product portfolio including microcontrollers, software, and connectivity components, which are highly complementary to Infineon's leading power semiconductors, sensors and security solutions. Combining the technical assets of both parties will be able to provide more comprehensive and advanced solutions for high-growth applications such as electric motors, battery-powered devices and power supplies. Infineon’s security expertise and Cypress’s connectivity technology will enable the company to accelerate its entry into new IoT applications in the industrial and consumer markets. In terms of automotive semiconductors, the expanded combination of microcontrollers and NOR flash memory will provide huge potential, especially in the application of advanced driver assistance systems and new automotive electronic architectures.
Through Cypress's strong R&D capabilities and an important position in the US market, Infineon can not only strengthen the services and products provided to important local customers in North America, but also enhance its strength in other important regions. The company will acquire a research and development department in Silicon Valley and expand its layout and market share in Japan, a strategic key market. At the same time, Infineon hopes to make the company's business model more resilient by realizing huge economies of scale. Based on the 2018 fiscal year pro forma revenue of 10 billion euros, this transaction will make Infineon the eighth largest chip manufacturer in the world. Based on the power semiconductors and safety controllers that have already had a global leading position, Infineon will become the leading chip supplier in the automotive electronics market.
Financial strength has improved with full integration
This acquisition will enhance Infineon’s financial strength. It is expected that Infineon’s shareholders will benefit from the profit growth achieved in the first full fiscal year after the completion of the transaction. Capital density will decrease and free cash flow ratio will increase. Infineon made a proven sales and cost synergy assumption for this transaction in its due diligence. It is estimated that by 2022, the expected economies of scale will create cost synergies of 180 million euros per year. The complementary product portfolio of the two parties will provide more chip solutions, and the long-term potential revenue synergy is expected to exceed 1.5 billion euros per year.
With the successful integration of the business, Infineon will adjust its target operating model accordingly. At that time, the company's goals include: full-cycle revenue growth of more than 9%, revenue profit rate of 19%, and investment and sales ratio will drop to 13%.
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