Infineon Technologies AG’s share price up, to acquire International Rectifier Corp. for $3bn

Infineon Technologies AG, Germanys largest chip manufacturer, announced that it reached agreement over the acquisition of LA-based International Rectifier Corp. for an estimated $3 billion.

The Chief Executive Officer of Infineon Technologies AG Mr. Reinhard Ploss described the deal as “a unique opportunity”.

“With their great knowledge of specific customer needs and their application understanding, International Rectifier employees will contribute to Infineon’s strategic development from product thinking to system understanding and system solutions,” Ploss said.

The acquisition would provide the Munich-based Siemens spinoff with “system knowhow in power conversion, while expanding its expertise in compound semiconductors and driving greater economies of scale in production”. Currently, Infineon is producing a variety of semiconductors used in industrial, security and automotive applications.

Infineon is to pay $40 per share for International Rectifier Corp, a 51% premium to Wednesdays closing share price. Both companies boards approved the acquisition.

Mr. Ploss, who took the position of Chief Executive Officer in 2012, was trying to strike an appropriate deal for some time due to the increasing demand for chips used in mobile devices and car electronics. Currently, Infineon has an 11% share in a $20bn market, while International Rectifier has another 4%.

The deal is the latest in a series of acquisitions and mergers in the semiconductor industry, as companies struggle to keep up with Moores law. Growing design costs, and eventual physical limitations, obstruct efforts and hurt earnings. With the latest deal, Infineon is stepping closer to the “the highly innovative region of California,” Ploss said.

Infineon Technologies AG added 0.74% to trade at €8.66 per share by 14:07 GMT, marking a one year change of +24.78% and valuing the company at $9.70bn(~$12.86bn). According to the Financial Times, the 27 analysts offering 12-month price targets for Infineon Technologies AG have a median target of €9.50, with a high estimate of €11.10 and a low estimate of €6.30. The median estimate represents a 10.47% increase from the last price of €8.60.