Fairchild Semiconductor: Ignored And Unloved Cash Flow/Buyback Story With 50%+ Upside
Dane Capital Management, LLC • 24 Comments
Dane Capital Management, LLC • 24 Comments
Fri, Mar. 18, 10:33 AM
- ON Semi (ON +1.1%) is selling $2.2B in first lien term loans and $600M in credit facility debt to pay for its $2.4B ($20/share), all-cash, acquisition of Fairchild Semi (FCS +0.4%), as well as repay existing Fairchild and ON debt. The credit facility, which ON will draw $200M from following the Fairchild deal's closing, will also be used for "general corporate purposes."
- The term loan is due in 2023 and carries an interest rate of LIBOR + 4.5%. Following the Fairchild deal's closing, ON expects to have a 3.2x pro forma net leverage ratio - it plans to cut the ratio to 2.0x within two years of closing.
- Separately, ON has once more extended its $20/share tender offer for Fairchild shares - the offer has led 19.2% of shares to be tendered, and is now due to expire at the end of March - and discloses German and Japanese regulators have approved the deal. However, the FTC has issued a request for additional info.
- The FTC request relates to ON and Fairchild's ignition IGBT businesses, which supply power switching chips for automotive internal combustion engines. ON has told the FTC it's willing to sell its ignition IGBT business (produced 2015 revenue of less than $25M) to secure deal approval.
Fri, Mar. 4, 10:39 AM
- ON Semi (ON +0.1%) has once more extended its tender offer to acquire Fairchild Semi (FCS -0.4%) shares, this time to March 17. The offer price remains at $20, even with the sales price Fairchild agreed to with ON in November.
- ON: "Pending satisfaction of the conditions to the Offer, the merger agreement requires successive 10-business day extensions of the Offer, and ON Semiconductor currently intends to continue making such successive extensions, subject to the other terms and conditions of the merger agreement."
- Only 9.7% of Fairchild shares have been tendered to date. Fairchild still trades above ON's offer price, but only slightly so - last month, Fairchild rejected a $21.70 share bid from a Chinese group, citing regulatory concerns.
- Update: ON extends its tender offer again to one minute after 11:59 pm July 7. All terms and conditions remain the same.
Wed, Feb. 17, 4:46 AM
- Fairchild Semiconductor (NASDAQ:FCS) has rejected a takeover offer worth about $2.5B led by Chinese state-backed buyers in favor of a bid from a U.S. rival because of concerns about regulatory approval.
- Fairchild had said in early January that it expected the Chinese bid to be a "superior proposal” - it amounted to $21.70 a share in cash, compared with the $20 a share that ON Semiconductor (NASDAQ:ON) was offering.
- The latter closed up 6% on Tuesday following the announcement.
- Previously: Fairchild reportedly set to accept Chinese offer, terminate ON deal (Feb. 02 2016)
Tue, Feb. 2, 2:17 PM
- Sources tell the NY Post Faircild Semi (FCS +1.5%) is "expected to accept" a $21.70/share ($2.5B) buyout offer from China Resources' chip arm and investment firm Hua Capital, thus unraveling Fairchild's $20/share deal to sell to ON Semi (ON -5%).
- Fairchild has risen to ~$20.75 following the report; ON, already down sharply (IDT's weak guidance could be weighing), has slightly added to its losses. The Nasdaq is down 2.1%.
- Fairchild is a month removed from stating it expects the Chinese offer to result in a "Superior Proposal," as described in the terms of the ON deal. The Post's sources state ON could still counter with a higher bid.
- Regarding fears U.S. regulators could reject a Chinese group's purchase of Fairchild, the Post reports Fairchild doesn't think its technology is sensitive enough to prevent a sale. One source: "The US government is comfortable with the Chinese acquiring basic technology, low-margin businesses."
Tue, Jan. 5, 2:19 PM
- Fairchild (FCS +3.7%) is back above $21 after declaring (in-line with an overnight Bloomberg report) a revised $21.70/share offer from China Resources' chip arm and investment firm Hua Capital "can reasonably be expected to result in a 'Superior Proposal'" to an existing $20/share deal to sell to ON Semi, as defined in the ON merger agreement.
- The power management chipmaker notes its conclusion allows it to "take certain actions," including engaging in talks with China Resources/Hua. For now, the ON deal remains in place.
- The revised $21.70/share offer contains a promise to pay the ON deal's $70M termination fee, and to pay a $108M reverse termination fee if China Resources/Hua are blocked from acquiring Fairchild by U.S. regulators. Fairchild is still trading ~$0.50 below the offer price.
Tue, Jan. 5, 3:03 AM
- Fairchild Semiconductor (NASDAQ:FCS) plans to say that a revised takeover proposal from a group led by China Resources Holdings and Hua Capital Management is likely a superior offer for the company, sources told Bloomberg.
- Fairchild, which agreed to a merger in November with ON Semiconductor (NASDAQ:ON), said last week it received a revised offer of $21.70 a share in cash from a bidder identified as "Party G" - the same group as the one led by China Resources' semiconductor arm.
- The improved bid would value the company's equity at $2.46B.
- Previously: FBR deems new Chinese offer for Fairchild much-improved, thinks ON could counter (Dec. 30 2015)
- Previously: Fairchild receives new buyout offer; shares +4.4% (Dec. 29 2015)
Dec. 30, 2015, 2:06 PM
- The revised $21.70/share bid for Fairchild Semi (FCS +3.4%) from a Chinese group (disclosed yesterday) includes an offer to pay the $70M termination fee Fairchild owes ON Semi (ON -1.1%) if it abandons its $20/share deal to be acquired by ON. The Chinese group is also willing to give Fairchild a $108M reverse termination fee if U.S. regulators (the CFIUS) block the deal, and $215M under the same terms as the ON termination agreement. (SEC filing)
- FBR's Chris Rolland: "While many details may yet to be revealed, on the surface, we believe the elimination of the ON Semi termination fee and the transfer of potential regulatory liability limits downside and makes the $21.70 offer superior." He thinks there's a good chance ON will up its offer to $22/share or higher, and believes a $24/share bid could be rationalized.
- Fairchild is trading right near $21.70. ON, which sold off in November after the Fairchild deal was announced, is seeing modest losses.
Dec. 29, 2015, 6:04 PM
- Two weeks after rejecting an unsolicited $21.70/share, all-cash, bid for the company, Fairchild Semi (NASDAQ:FCS) says it has received a revised $21.70/share cash offer.
- The board plans to "carefully review and consider" the revised offer. For now, its official recommendation of a $20/share deal to sell to ON Semi (NASDAQ:ON) remains unchanged. SA author Jaret Wilson has argued the ON deal undervalues Fairchild.
- Fairchild has risen to $20.89 after hours. Bloomberg reported three weeks ago the original $21.70/share offer for Fairchild came from a Chinese group featuring China Resources Holdings' chip arm and investment firm Hua Capital.
Dec. 14, 2015, 7:49 AM
Dec. 8, 2015, 7:57 AM
Nov. 18, 2015, 7:07 AM
- All-cash deal values Fairchild (NASDAQ:FCS) at $2.4B.
- The price is a 41% premium to FCS's Oct.13 price, the day before reports that the company was seeking a buyer.
- ON says the deal with add to adjusted EPS and free cash-flow ; sees “significant accretion” within a few quarters.
- Sees $150M in cost savings within 18 months.
- Plans to fund deal with cash, $2.4B in new debt.
- The semi industry has seen more than $100B in deals this year.
- FCS +6.8% premarket to $19.10.
- Conference call: 8:00 AM.
- Related: Fairchild Semi: What It's Worth, SanDisk May Be Bought (Oct. 17)
- Related: 20% Upside In Fairchild Deal (Oct. 15)
Oct. 29, 2015, 3:58 PM
- On his company's Q3 earnings call, STMicroelectronics (STM -5.7%) CEO Carlo Bozotti denied the French/Italian chipmaker is interested in acquiring analog/power management IC vendor Fairchild Semi (FCS -5.7%). Bloomberg reported on Tuesday STMicro is weighing a bid for Fairchild, two weeks after having reported Infineon and ON Semi have held talks with the company.
- Both STMicro and Fairchild are down sharply, the former due to its soft Q4 guidance. Many other chip stocks are in the same boat.
Oct. 27, 2015, 11:34 AM
- Bloomberg reports STMicroelectronics (STM -2.1%) is weighing a bid for U.s-based analog/power management IC vendor Fairchild Semi (FCS +4.8%). Sources caution STMicro might decide against such a move in favor of focusing on bottom-line improvement.
- Two weeks ago, Fairchild was rumored to be talking with ON Semi and Infineon about potential deals. Yesterday, Bloomberg reported the French and Italian governments want STMicro to cut its dividend in order to have more flexibility to up its R&D spend.
Oct. 14, 2015, 1:06 PM
- Bloomberg reports Fairchild (FCS +14.6%) has held buyout talks with fellow analog/mixed-signal chipmakers ON Semi (ON +7.5%) and Infineon (OTCQX:IFNNF). Goldman is advising.
- The report is the latest sign chip industry consolidation remains in full swing in spite of the Nasdaq/SOX's recent selloff. Yesterday, Bloomberg reported SanDisk is talking with Micron and Western Digital about a potential sale.
Nov. 17, 2014, 12:57 PM
Aug. 20, 2014, 11:51 AM
- Fairchild (FCS +2.5%), Intersil (ISIL +1.3%), Semtech (SMTC +2.6%) and Power Integrations (POWI +3.3%) have all given back a chunk of their early gains. Peer International Rectifier, which also rallied, has been halted.
- All 5 companies had jumped on a Bloomberg report stating Infineon is nearing a deal to buy a U.S. chipmaker for ~$2B.
Fairchild Semiconductor International, Inc. engages in the development of power management solutions. It operates through the following segments: Mobile, Computing, Consumer, and Communication (MCCC), Power Conversion, Industrial, and Automotive (PCIA), and Standard Discrete and Standard Linear... More
Industry: Semiconductor - Integrated Circuits
Country: United States
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