A worker holds an Infineon Wafer in a production facility. ()
German chipmaker Infineon Technologies AG said on Wednesday it would buy Silicon Valley-based International Rectifier Corp. in a $3 billion all-cash deal that would strengthen Infineon’s regional presence and expand its economic scale in the power management technology business.
Infineon would fund the bulk of the purchase using its $2 billion line of credit. The transaction—Infineon’s largest ever—is expected to be completed in late 2014 or early 2015, pending regulatory and company board approvals.
Kirkland & Ellis and Freshfields Bruckhaus Deringer acted as Infineon’s legal adviser, together with the company’s in-house counsel. Fried, Frank, Harris, Shriver & Jacobson advised International Rectifier. Eckart Suenner, of counsel at Allen & Overy in Mannheim, Germany, serves as a member of the supervisory board at Infineon.
As part of the transaction, Infineon would pay $40 per share for International Rectifier—a 51 percent premium over the target’s Tuesday closing price. The deal is expected to improve Infineon’s position in the U.S. and Asian markets while enlarging its portfolio of energy-saving products, including high efficiency power devices based on different chemical compounds. According to IHS iSuppli ranking, the company is the world’s 11th-largest semiconductor company by revenue.
“The combination of Infineon’s and International Rectifier’s products, technological and innovative excellence, as well as distributional strength will unleash great potential,” said Reinhard Ploss, CEO of Infineon, in a statement.
The deal adds fuel to rising mergers and acquisitions activity in the chip industry this year as a result of growing costs in design and manufacturing. According to Bloomberg, 2014 has been the busiest year for North American semiconductor producers since 2011, with $11 billion worth of transactions in the sector announced in first six months of the year.
Last year also saw a string of big chipmaker deals. In December, Avago Technologies Ltd. bought LSI Corp. for $6.6 billion four months after Applied Materials Inc. announced its $9.3 billion purchase of Tokyo Electron Ltd. In February of this year, RF Micro Devices Inc. agreed to buy TriQuint Semiconductor Inc. for about $1.5 billion.
The rapid growth of semiconductor sales worldwide may offer Infineon another reason to buy International Rectifier. The Semiconductor Industry Association said second-quarter revenue for chipmakers surged to $82.7 billion, representing a 10.8 percent increase over the same period last year.
For its part, International Rectifier on Wednesday reported a quarterly profit of $12.9 million for the period ending June 29, compared with a $6.1 million loss a year earlier. It also projected a profit in the fiscal fourth quarter.
International Rectifier was the target of Vishay Intertechnology Inc.’s $1.7 billion bid in 2008. International Rectifier had rebuffed that bid, calling it opportunistic.
Kirkland & Ellis’ team advising Infineon on its International Rectifier buy included corporate partners David Fox, Sarkis Jebejian and David Feirstein, and associates John Kupiec and Clément Smadja. This is Kirkland’s first M&A deal for Infineon.
Freshfields’ team for Infineon consisted of finance partner Frank Laudenklos and associates Max Danzmann and Martin Heuber. Freshfields advised Infineon on its capital increase in 2009 and share buyback program in 2011.
In-house counsel for Infineon included Michael Eickstedt, Regina Käsberger-Grün, Horst Meyer, Cornelius Simons and Roman Wingert.
Fried Frank’s team for International Rectifier was led by corporate partner Philip Richter with assistance from corporate partners Abigail Bomba, Mario Mancuso and Jüergen Van Kann; antitrust and competition partners Tobias Caspary and Barry Nigro; executive compensation and employee benefits partner Donald Carleen; intellectual property and technology partner Henry Lebowitz; litigation partners Jerry Howe and Peter Simmons and tax partner Alan Kaden. Counsel on the team were Arthur Fleischer, Michael Gershberg, Alyson Redman and Thorsten Stuecklin.
Fried Frank provided legal advice to International Rectifier in Vishay Intertechnology Inc.’s unsolicited $1.7 billion offer in 2008.