ON Semi to acquire AMIS for $915M to create power semi giant

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 12/13/2007

To further the transformation of ON Semiconductor Corp. into an analog and power semiconductor giant with what the company says is enhanced scale, higher value and higher margin products, deep customer relationships and an expanded addressable market, the Phoenix, Ariz.-based power semiconductor supplier announced today it is acquiring AMIS Holdings Inc., the parent company of AMI Semiconductor (AMIS) in an all-stock transaction valued at approximately $915 million.

AMIS is a mixed-signal and digital semiconductor provider headquartered in Pocatello, Idaho.

This move compliments one made early last month, when ON acquired the CPU voltage regulation and PC thermal monitoring product line from Analog Devices Inc., which represented approximately $80 million in revenue for ADI during its fiscal year 2007, closed November 3, consists of core voltage regulator products for CPUs in computing and gaming applications, along with temperature sensors and fan-speed controllers for managing the temperature of the CPU.

Keith Jackson, ON Semi’s president and CEO noted that the combination of ON Semiconductor’s standard products and manufacturing infrastructure with AMIS’s growing standard products business and substantial custom product portfolio will allow the combined company to better address customer needs.

“AMIS will immediately contribute exciting new products and capabilities in the medical and military/aerospace markets and will complement our existing automotive and industrial businesses. Over time, we plan to leverage the advanced sub-micron capabilities of our Gresham, Oregon, fabrication facility to achieve operational synergies and extend AMIS’s high voltage and low power offerings,” Jackson added in a statement.

The boards of directors have both approved the acquisition, the terms of which state that AMIS shareholders will receive 1.150 shares of ON Semiconductor common stock for each share of AMIS common stock they own, representing a value of approximately $10.14 per share based on the closing stock price of ON Semiconductor on December 12.

When the transaction is complete, ON Semiconductor will issue approximately 104 million shares of common stock on a fully diluted basis to complete the transaction, so that ON Semiconductor and AMIS stockholders will own approximately 74 and 26 percent, respectively, of the combined company.

The companies expect the transaction to close in the first half of 2008. 

Upon closing, ON Semiconductor may record a one-time charge for purchased in-process R&D expenses and other deal related costs.

ON’s executive VP, CFO and treasurer Donald Colvin also noted that the acquisition provides “compelling financial opportunities” in addition to the strategic benefits.

“We have identified significant operational and manufacturing cost synergies, up to $50 million in pre tax savings in 2009 that may be achieved through the integration of AMIS and rationalization of our combined infrastructure.  We expect to begin to realize these synergies within two quarters of closing the transaction.  With these cost savings, and excluding the impact of amortization expense, we expect the acquisition will be accretive to our earnings per share exiting 2008,” Colvin explained.

“The combined company would also have latest twelve months cumulative revenues of greater than $2 billion and latest twelve months cumulative EBITDA of greater than $500 million.  We believe the strong EBITDA of the combined company, along with the rationalization of our capital expenditures and utilization of our tax losses will enable the combined company to generate significant cash flow for our shareholders.  We have also identified potential revenue synergies that, while we are not counting on them to make this acquisition accretive, provide exciting opportunities for further enhancing our combined revenue growth,” he added.

ON’s Jackson will serve as president and CEO of the combined company with corporate headquarters to remain in Phoenix, with a significant presence maintained in Pocatello, Belgium and various other locations worldwide.  ON’s non-executive chairman J. Daniel McCranie will continue as non-executive chairman of the board of directors of the combined company, which will be expanded to eight members with the addition of Christine King, CEO of AMIS.

King said of the acquisition, “This transaction represents a compelling opportunity for AMIS employees, customers and shareholders by combining the outstanding manufacturing excellence of ON Semiconductor with the world class mixed-signal design talent of AMIS. We believe AMIS shareholders will not only benefit from the initial premium represented by the purchase price, but also from a significant post-merger ownership in a combined ON Semiconductor/AMIS company that is expected to have enhanced growth, cash flow and profitability prospects. Through the combination, our employees will have access to a more complete technology roadmap and capabilities as well as the opportunity to serve our customers with a wider array of products; either custom or standard.”

Shares of the combined company will trade on the NASDAQ Global Exchange under the symbol “ONNN.”

In addition, ON also announced today that, in connection with this transaction, its board of directors has increased its share repurchase authorization from 30 to 50 million shares to increase ON’s existing stock repurchase program and is expected to commence as soon as practicable.