ON Semiconductor made the approach to Fairchild back in November last year but has had regulatory problems in the $2.4bn deal.
The merged company would have a combined share of over 60 percent in the worldwide market for Insulated-Gate Bipolar Transistors specifically designed and calibrated for automotive ignition systems, or Ignition IGBTs. Without a sell off, the Federal Trade Comssion (FTC) in the US believed the merger would substantially lessen competition in the worldwide market for Ignition IGBTs, resulting in higher prices and reduced innovation.
ON Semiconductor has agreed to sell the Ignition IGBT business to Chicago-based manufacturer Littelfuse within 10 days of the close of the transaction. This includes design files and intellectual property that Littelfuse needs to manufacture ON’s Ignition IGBTs. ON must also support the transfer of its customer relationships to Littelfuse, and supply Ignition IGBTs for Littlefuse to sell to customers while Littelfuse sets up its manufacturing operations.
The portfolio has annualized sales of approximately $55 m and is expected to close in late August, 2016. “The acquisition of this portfolio aligns with our strategy to expand in power semiconductor applications as well as increase our presence in the automotive electronics market,” said Ian Highley, senior vice president and general manager, semiconductor products and chief technology officer for Littelfuse. “These products have strong synergies with our existing circuit protection business, will strengthen our channel partnerships and customer engagement, and expand our power semiconductor portfolio.”
Littelfuse also plans to invest approximately $30 million in its semiconductor fabrication locations to enhance its production capabilities, add significant capacity to its China fabrication facility and transfer the production of the ignition IGBT devices over the next few years, as the company works with customers on their timing and requirements. “Once we complete the transfer of these products, we expect this acquisition to have margins of more than 30 percent,” said Meenal Sethna, executive vice president and chief financial officer.
The agreement with ON Semiconductor is subject to public comment for 30 days, finishing on September 26, 2016, after which the Commission will decide whether to make the proposed consent order final.