Fairchild Semiconductor Gets Unsolicited Bid at $21.70/Share

  • Latest offer beats ON Semiconductor's $20/share proposal
  • Semiconductor industry has seen $110 billion in deals in 2015

Fairchild Semiconductor International Inc. said it received an unsolicited proposal to buy the company for $21.70 a share in cash, besting a previous offer by a subsidiary of ON Semiconductor Corp. last month for $20 a share.

Fairchild’s board of directors will review and consider the proposal, the company said in a statement Tuesday.

In November ON Semiconductor agreed to buy Fairchild for $2.4 billion. The offer came a month after Fairchild said it was seeking a buyer and was in discussions with potential suitors including ON Semiconductor and Infineon Technologies AG.

“ON is going back to the drawing board,” said Ian Ing, executive director at MKM Partners. “Based on other transactions in the past, they might be able to come up with an offer that’s better than $20 a share, not necessarily $21.70, and just highlight the lower execution risk, and earlier close dates.”

The offer by an unnamed suitor is the latest example of escalating bids and drawn out battles for semiconductor companies. The industry has seen $110 billion in deals this year as companies combine in the face of rising costs of production and a shrinking customer list. Microsemi Corp. was in a monthlong contest with Skyworks Solutions Inc. for PMC-Sierra Inc., which Microsemi ultimately won in November for about $2.5 billion.

While Fairchild is one of the oldest suppliers in the industry, it’s been surpassed in scale. The San Jose, California-based company, which makes semiconductors that regulate power in electronics, chips for cars and electronic signal converters, has annual revenue that’s about a tenth of Texas Instruments Inc., the biggest maker of such products.

Several analysts suspect the bidder could be a Chinese company, as that country pursues ambitions of creating a national champion in semiconductors. Tsinghua Unigroup Ltd. has expressed interest in buying U.S. memory chipmaker Micron Technology Inc., according to people familiar with the matter.

“There’s a lot of domestic consumption of cell phones and PCs and electronics and they prefer to have a greater prevalence of domestic suppliers in that market,” Ing said of China. “It makes a lot of sense. It’s very strategic for the country, a strategic industry to help build out.”

China Speculation

Based on details of a filing Friday, FBR Capital Markets & Co. analyst Christopher Rolland said Fairchild indicated that six different companies had expressed interest in Fairchild since April and that there was only a “remote” chance ON Semiconductor’s bid would be outbid. One of the parties mentioned in the filing was likely a Chinese entity, Rolland said.

“There’s been speculation about interest from China, and that would make sense because 42 percent of Fairchild’s revenue is generated there,” Woo Jin Ho, an analyst at Bloomberg Intelligence, said. "Infineon has been mentioned to be in the mix, but that’s unclear and doesn’t seem likely.”

Fairchild shares jumped 6.4 percent, to $20.78, their highest price since May, at 9:34 a.m. New York. They rose 16 percent this year through Monday.

Previously, ON edged out Infineon, which had been said to be the frontrunner in early November. STMicroelectronics NV also explored an acquisition of Fairchild, but said on an earnings call in October that it had no plan to make an offer.

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