FRANKFURT (Reuters) – Germany’s Infineon has agreed to buy Silicon Valley-based Cypress Semiconductor for $10 billion, in an expensive move by Europe’s largest chip-maker to expand further in next-generation automobiles and Internet technologies.
Investors swiftly gave the deal a thumbs-down on concerns that Infineon was paying a heavy price just as the chip business was weakening, pushing its shares 9% lower on Monday.
The deal would create an automotive leader with a 13% market share, coupling Infineon’s prowess in managing electric drivetrains with Cypress’s superior connectivity in areas such as in-car entertainment.
That would enable the combined company to offer more complete packages for electric vehicles that are expected to win a growing share of the car market as governments clamp down on emissions from petrol- and diesel-powered vehicles.
The cash offer of $23.85 per share represents a 46% premium to Cypress’ share price over the last month, the Munich-based maker of power-management chips said.
That equates to a multiple of 4.5 times sales at San Jose, California-based Cypress. “It’s a proud price, no doubt,” said Infineon CEO Reinhard Ploss.
“From our point of view it was an acceptable price, and if you look at the synergies, it represents an additional gain in value,” Ploss told reporters on a conference call.
Chief Marketing Officer Helmut Gassel said discussions had been triggered by interest expressed in Cypress by another unidentified party. Infineon was invited to take part in the process around five weeks ago.