Infineon announced the $3 billion cash deal late on Wednesday. The
price was 51 percent above International Rectifier's market value
before it was announced and Infineon shares fell in after-hours
"The premia (in the chip sector) are high, but the 50 percent we are
offering is pretty much in the middle of the bandwidth in this
space," Infineon finance chief Dominik Asam told analysts during a
conference call on Thursday.
Asam said he saw "a good bunch of cost synergies" that made him
comfortable with the premium Infineon has to pay, without giving
Analysts said International Rectifier would strengthen Infineon's
position in power management chips. But integrating the business
would need to be flawless to generate the savings required to
justify the price.
Infineon's chips activate car airbags, enable cruise control, manage
power supplies and cut vehicle emissions. The company has shunned
major takeovers since it was spun off from engineering conglomerate
Siemens in 1999.
Confident it would make a success of the International Rectifier
deal, Bernstein raised its rating on Infineon's shares to
"outperform" from "market perform", saying it expected cost benefits
of about $100 million.
Natixis analysts said they would "be watching closely, as Infineon's
track record on M&A is limited and extracting major synergies will
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Infineon shares edged down 0.3 percent to 8.577 euros by 0951 GMT,
while Germany's blue-chip DAX index was up 0.3 percent.
Asam said his team had looked at a "whole bunch" of possible
acquisition targets before settling on International Rectifier.
"We approached another (target) but did not converge on price," he
said, without naming the company. He said most other takeover
candidates seemed too expensive.
Infineon said it expected International Rectifier's profitability to
be "at least in line with" its own operating margin target of 15
percent by the second full fiscal year after the deal closes.
(Reporting by Maria Sheahan; editing by Jonathan Gould and Tom
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