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Infineon to Buy Cree's Wolfspeed for $850M, Shares Flat
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Infineon Technologies AG (IFNNY - Free Report) recently inked a definitive agreement with premium manufacturer and marketer of lighting-class LEDs, Cree Inc. to acquire its Wolfspeed Power and RF division, which will also include the related SiC wafer substrate business.
Despite being a major buyout since Infineon’s International Rectifier acquisition at the end of second-quarter fiscal 2015, this news failed to stoke investor’s enthusiasm as shares of the company remained relatively flat at $15.06 in the regular trading session on Friday.
Valued at $850 million (approximately Euro 740 million), this all-cash transaction is expected to close by the end of calendar year 2016 after meeting regulatory approvals in various jurisdictions. The company plans to use bank financing of $720 million and cash-on-hand of $130 million in order to finance this transaction.
Wolfspeed: A Leader in SiC Power Semiconductors
Based in North Carolina, USA, Wolfspeed has been an operating arm of Cree for over thirty years. It has garnered an unparalleled reputation among clients for providing state-of-the-art SiC-based power and GaN-on-SiC-based RF power solutions. Cree employs about 550 workers and comprises an IP portfolio of approximately 2,000 patents and patent applications. The company had generated pro-forma revenues of $173 million in the twelve months ending Mar 27, 2016.
Being a part of Infineon will help Wolfspeed to proactively commercialize its silicon carbide and gallium nitride technology by leveraging the former’s market reach and infrastructure. It will further allow the company to increase value for shareholders, employees and customers.
Infineon’s Gains from the Buyout
This acquisition will help Infineon expand its portfolio of compound semiconductors and bolster its position as a supplier of power and RF power solutions. This in turn will allow the company to strengthen its foothold in key markets including electro-mobility, renewables and next-generation cellular infrastructure needed for IoT.
Furthermore, Infineon is eyeing the number one slot in the SiC-based power semiconductor and RF power markets with this acquisition. The company believes these advanced technologies will eventually lead to the introduction of a host of new offerings in energy efficiency, connectivity and mobility domains, supplementing Infineon’s future growth. Furthermore, this buyout is expected to be immediately accretive to Infineon’s adjusted earnings per share and margin.
The Future of Semiconductors
Power management solutions driven by compound semiconductors, will allow clients to introduce systems with higher energy-efficiency, smaller footprint and lower system costs. Mostly renewable automotive businesses, which are increasingly focusing on plug-in hybrid and all-electric vehicles, are expected to benefit the most from the SiC-based semiconductors. Also, next-generation cellular infrastructure including 5G, which requires high frequency, can gain significantly from the innovative offerings resulting out of this buyout.
Infineon has been benefiting significantly from its acquisition of International Rectifier Corp. This acquisition has been one of the key drivers of profitability for the company in the past few quarters. Infineon’s Automotive, Industrial Power Control and Power Management segments have received major boost since this acquisition. The company believes the latest acquisition will strongly complement the International Rectifier buyout, thereby signaling bright prospects for the company.
Despite the long-term growth potential, the cyclical nature of the semiconductor industry and stringent competition are proving to be significant headwinds. Additionally, ongoing softness in the macroeconomic environment is hurting the global smartphones market, which in turn is a concern for the company. Also, the weakening of the U.S. dollar is expected to compound the challenges of this Zacks Rank #4 (Sell) company.
Better-ranked stocks in the industry include Amkor Technology, Inc. (AMKR - Free Report) and Ambarella, Inc. (AMBA - Free Report) . Both stocks carry a Zacks Rank #2 (Buy).
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Infineon to Buy Cree's Wolfspeed for $850M, Shares Flat
Infineon Technologies AG (IFNNY - Free Report) recently inked a definitive agreement with premium manufacturer and marketer of lighting-class LEDs, Cree Inc. to acquire its Wolfspeed Power and RF division, which will also include the related SiC wafer substrate business.
Despite being a major buyout since Infineon’s International Rectifier acquisition at the end of second-quarter fiscal 2015, this news failed to stoke investor’s enthusiasm as shares of the company remained relatively flat at $15.06 in the regular trading session on Friday.
Valued at $850 million (approximately Euro 740 million), this all-cash transaction is expected to close by the end of calendar year 2016 after meeting regulatory approvals in various jurisdictions. The company plans to use bank financing of $720 million and cash-on-hand of $130 million in order to finance this transaction.
Wolfspeed: A Leader in SiC Power Semiconductors
Based in North Carolina, USA, Wolfspeed has been an operating arm of Cree for over thirty years. It has garnered an unparalleled reputation among clients for providing state-of-the-art SiC-based power and GaN-on-SiC-based RF power solutions. Cree employs about 550 workers and comprises an IP portfolio of approximately 2,000 patents and patent applications. The company had generated pro-forma revenues of $173 million in the twelve months ending Mar 27, 2016.
Being a part of Infineon will help Wolfspeed to proactively commercialize its silicon carbide and gallium nitride technology by leveraging the former’s market reach and infrastructure. It will further allow the company to increase value for shareholders, employees and customers.
Infineon’s Gains from the Buyout
This acquisition will help Infineon expand its portfolio of compound semiconductors and bolster its position as a supplier of power and RF power solutions. This in turn will allow the company to strengthen its foothold in key markets including electro-mobility, renewables and next-generation cellular infrastructure needed for IoT.
Furthermore, Infineon is eyeing the number one slot in the SiC-based power semiconductor and RF power markets with this acquisition. The company believes these advanced technologies will eventually lead to the introduction of a host of new offerings in energy efficiency, connectivity and mobility domains, supplementing Infineon’s future growth. Furthermore, this buyout is expected to be immediately accretive to Infineon’s adjusted earnings per share and margin.
The Future of Semiconductors
Power management solutions driven by compound semiconductors, will allow clients to introduce systems with higher energy-efficiency, smaller footprint and lower system costs. Mostly renewable automotive businesses, which are increasingly focusing on plug-in hybrid and all-electric vehicles, are expected to benefit the most from the SiC-based semiconductors. Also, next-generation cellular infrastructure including 5G, which requires high frequency, can gain significantly from the innovative offerings resulting out of this buyout.
Can Inorganic Growth Offset Headwinds?
INFINEON TECH Price
INFINEON TECH Price | INFINEON TECH Quote
Infineon has been benefiting significantly from its acquisition of International Rectifier Corp. This acquisition has been one of the key drivers of profitability for the company in the past few quarters. Infineon’s Automotive, Industrial Power Control and Power Management segments have received major boost since this acquisition. The company believes the latest acquisition will strongly complement the International Rectifier buyout, thereby signaling bright prospects for the company.
Despite the long-term growth potential, the cyclical nature of the semiconductor industry and stringent competition are proving to be significant headwinds. Additionally, ongoing softness in the macroeconomic environment is hurting the global smartphones market, which in turn is a concern for the company. Also, the weakening of the U.S. dollar is expected to compound the challenges of this Zacks Rank #4 (Sell) company.
Better-ranked stocks in the industry include Amkor Technology, Inc. (AMKR - Free Report) and Ambarella, Inc. (AMBA - Free Report) . Both stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>