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How Will Infineon Acquisition Deal Benefit Cypress?

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Cypress’s buyout offer

Cypress Semiconductor (CY) stock rose close to 24% to $22.07 on Monday, nearing an eight-year high after it received a buyout offer from Germany-based chipmaker Infineon Technologies AG for $10.06 billion. Last week, the San Jose-based chipmaker had reportedly shown interest in becoming a takeover target.

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Deal details

According to the deal, Infineon will pay $23.85 per share to Cypress shareholders using its equity, debt, and cash. Cypress shareholders could also get continued dividends until the deal closes, which is expected by the end of the year or early 2020.

The deal is subject to approval by Cypress shareholders and other regulatory bodies. However, Cypress would have to pay a fee of $330 million to Infineon if the US chipmaker terminates the deal. However, under any other situation, Infineon would pay a termination fee of $425 million.

Notably, Cypress had been trying to reshape itself and provide chips for use in vehicles and Internet-of-Things (or IoT). Moreover, the company expects its automotive business to grow 8% to 10% annually over the next five years and predicts its IoT unit to expand as much as 14% in that period.

The acquisition deal is expected to benefit Cypress with its plans to expand in the automotive business as Infineon generates more than two-fifths of the total revenue from automotive accounts. However, Infineon faces softness in China, the world’s largest car market.

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