China Resources Said to Revise Offer Terms for Fairchild Bid

  • Offer at same $21.70-per-share price as earlier December bid
  • Target's board still backs merger deal with ON Semiconductor

A group led by China Resources Holding Co. and Hua Capital Management revised some terms of its offer for Fairchild Semiconductor International Inc. in an attempt to win backing from the target’s board, according to a person familiar with the matter.

Fairchild, which agreed to a merger last month with ON Semiconductor Corp., said it received a revised, unsolicited acquisition offer of $21.70 a share in cash. That would value the company’s equity at $2.46 billion. The amended proposal from a bidder identified as “Party G” is from the same group led by China Resources’ semiconductor arm, the person said, asking not to be identified because the discussions are private.

While the U.S. chipmaker’s board said it will review offer from Party G, “the company remains subject to the merger agreement and the board has not changed its recommendation in support” of the ON Semiconductor deal, Fairchild said Tuesday in a regulatory filing.

Earlier this month, the China Resources-led group made a bid for Fairchild at the same $2.46 billion price, Bloomberg reported. That followed a November agreement with ON Semiconductor to buy the San Jose, California-based company for $2.4 billion.

Break Fee

Fairchild on Dec. 14 rejected the earlier China Resources bid as not necessarily a “superior proposal” to the merger agreement with Phoenix-based ON Semiconductor.

In the revised proposal, Party G offers to pay the $72 million that Fairchild would owe ON Semiconductor as a breakup fee if it canceled the merger agreement and accepted a deal with Party G, according to the filing. Additionally, the group provided a debt commitment letter from JPMorgan Chase & Co.

The semiconductor 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. China Resource’s takeover offer came amid that country’s efforts to create a national champion in semiconductors.

Earnings Boost

Fairchild shares gained almost 3 percent in extended trading after the revised bid was disclosed. The company’s stock closed at $20.01 on Tuesday in New York and has jumped 19 percent this year.

While Fairchild is one of the oldest suppliers in the industry, it has been surpassed in scale. The company, which makes semiconductors that regulate power in electronics, chips for cars and electronic signal converters, has annual revenue that’s about 1/10th of Texas Instruments Inc., the biggest maker of such products.

ON said the deal for Fairchild would help it gain a leading share in the market for power semiconductors as well as strengthen efforts to expand sales in areas such as the automotive industry. The acquisition would immediately increase ON’s adjusted earnings per share and provide about $150 million in annual cost savings within 18 months of the deal, the company has said.

Several other chipmakers, including Infineon Technologies AG and STMicroelectronics NV, considered acquiring Fairchild before ON’s bid last month.

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