Infineon to swallow Cypress in a move to expand product portfolio: Page 2 of 2

June 03, 2019 //By Christoph Hammerschmidt
Infineon to swallow Cypress in a move to expand product portfolio
Chip manufacturer Infineon intends to acquire Cypress Semiconductor. The strategic move will enable Infineon to offer the "most comprehensive portfolio for connecting the real world with the digital world," said Infineon CEO Reinhard Ploss. The company sees great potential for additional sales in the target markets of automotive, industry and Internet of Things. Infineon will pay approximately €9.0 billion for the acquisition.

The acquisition will also improve Infineon’s financial strength and Infineon shareholders are expected to benefit from earnings accretion beginning in the first full fiscal year after closing. The capital intensity will decrease, resulting in an increasing free cash flow margin. Infineon has validated sales and cost synergies assumptions as part of due diligence. Expected economies of scale will create cost synergies of €180 million per annum by 2022. The complementary portfolios will enable the offering of further chip solutions with a revenue synergies potential of more than €1.5 billion per annum in the long term. 

Upon successful integration, Infineon will adapt its target operating model accordingly. Then, the company targets through-cycle revenue growth of 9+ percent and a segment result margin of 19 percent. The investment-to-sales ratio is targeted to decrease to 13 percent. 

Under the terms of the agreement, Infineon will offer US$23.85 in cash for all outstanding shares of Cypress. This corresponds to a fully diluted enterprise value for Cypress of €9.0 billion.

 

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