Infineon begins to slash stake in Qimonda

By Colleen Taylor, Contributing Editor -- Electronic News, 9/12/2007

Germany-based semiconductor logic developer Infineon AG announced Tuesday measures to reduce its equity interest in Qimonda AG, the memory products maker that was carved out of Infineon last year.

As a first step in this latest reduction, Infineon said it has submitted an offer to sell 25 million ADSs from its own shareholdings with an additional option of up to 3.75 million additional ADSs. Assuming that the sale proceeds as planned, Infineon said that its interest in Qimonda would be reduced to 78.6 percent. If the additional option is exercised in full, Infineon's interest in Qimonda would be further reduced to 77.5 percent. One ADS represents one ordinary share in Qimonda.

Additionally, Infineon Technologies Investment B.V., a wholly owned Infineon subsidiary, intends to issue an exchangeable bond plus an additional option. During the three-year exchangeable bond's term, its holders have the right to receive Qimonda ADSs from Infineon in lieu of cash settlement. If all bondholders would exercise their exchange options, Infineon would give 17 million Qimonda-ADSs for the redemption of the exchangeable bond, equivalent to another 5 percent of Qimonda's share capital.

The news of Infineon's plan to lessen its Qimonda holdings comes as little surprise to industry watchers, as it is not the first time in recent months that Infineon has voiced its intention to decrease its stake in the memory-making spin-off. Last month, Infineon said it planned to reduce its stake in Qimonda to "significantly" less than 50 percent by its 2009 shareholder meeting.

In a research note sent today, investment firm Lehman Brothers said that the move was a positive one for Infineon, as it "provides concrete evidence of the company's intent to reduce its stake."  The firm also noted that the sale could result in some softness for memory stocks, including Qimonda and its rival Micron Technology Inc.