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STMicroelectronics Said to Weigh Bid for Fairchild Semiconductor

  • Deal would let STMicro strengthen its digital products unit
  • Fairchild said to work with Goldman Sachs to identify buyer

STMicroelectronics NV is considering a bid for Fairchild Semiconductor International Inc. as Europe’s largest chipmaker seeks to boost growth and shore up its digital products business, according to people familiar with the matter.

The Geneva-based company has conducted analysis as it explores an offer for the U.S. chipmaker, said the people, asking not to be identified discussing internal deliberations. Fairchild jumped 4.3 percent to $17.55 on Tuesday in New York for a market value of $2 billion. STMicro may decide against an acquisition of this size to focus on improving profitability and managing costs, two of the people said.

STMicro has struggled to revive sales and generate consistent profit amid waning personal-computer demand and competition from rivals such as Texas Instruments Inc. Chief Executive Officer Carlo Bozotti told investors in May that he’s weighing options for the digital business as part of a pledge to fix continued losses at the unit. Fairchild makes semiconductors that regulate power in electronics, chips for cars and electronic signal converters.

A representative for STMicro declined to comment whether the chipmaker is interested in a bid for San Jose, California-based Fairchild.

STMicro shares added 0.9 percent to 6.63 euros at 9:01 a.m. in Paris, paring their losses this week to 7 percent. Bloomberg reported on Monday that the company’s government shareholders in France and Italy were pushing for a dividend cut to allow it to invest more in research and development. STMicro is scheduled to report third-quarter earnings on Thursday.

Fairchild, one of the oldest chipmakers in the U.S., has hired Goldman Sachs Group Inc. to help it find a buyer, people with knowledge of the matter said earlier this month. The company has held discussions with potential suitors including ON Semiconductor Corp. and Infineon Technologies AG, the people said at the time. Fairchild’s stock has climbed more than 20 percent since.

Industry Pioneers

A takeover of Fairchild by STMicro would combine two semiconductor pioneers that have been surpassed by larger rivals, while adding to a merger frenzy in the industry. Makers of semiconductors have announced more than $76 billion in mergers and acquisitions this year, the highest annual tally on record. The companies are pooling assets as phones, cars and other electronics become more sophisticated and increasingly connect to the Internet, boosting the costs of designing and producing the pieces that run them.

"Purchasing a company like Fairchild may be a good move for STMicro, paving the way for it to the U.S. market where the most promising segment, Internet of things, is showing signs of becoming lucrative," Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan’s Bocconi University, said in a phone interview.

STMicro’s digital unit makes chips used in set-top boxes and smartphone sensors, and the company also makes semiconductors sold to makers of vehicles, wearable electronics and industrial machinery.

Three months ago, people familiar with the matter said that STMicro and its French state owner were headed for a collision over a strategy that included possible job cuts. Bozotti’s turnaround plan for the digital unit entails cutting hundreds of positions in France and elsewhere out of a workforce of about 2,500, people said at the time.

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