LONDON — Sanyo Electric Co. Ltd. has agreed to sell its loss-making semiconductor subsidiary to On Semiconductor Corp. for $366 million in a mix of stock and cash, which is more than had been previously predicted.
The move allows On Semi to increase its manufacturing scale, broaden its product portfolio and expand its presence in the Japanese market. It will give On Semi annual sales of about $3.5 billion.
The deal is subject to adjustment pursuant to the terms of the transaction and in the most recently completed quarter Sanyo Semiconductor's annualized revenue was approximately $1.2 billion. The acquisition is expected to be completed before the end of 2010.
The acquisition will add microcontrollers and ASIC capabilities as well as power modules and motor control to On Semi's portfolio. Sanyo supplies many consumer, automotive and industrial end-markets.
"By combining these two highly complementary businesses, we will be better positioned to capture growth on a global scale. We believe the union of On Semiconductor and Sanyo Semiconductor will greatly enhance our presence in the automotive and consumer end-markets and significantly strengthen our geographic presence in the Asia-Pacific region," said Keith Jackson, president and CEO of On Semi, in a statement.
"Having completed seven acquisitions, On Semiconductor has a proven track record of successfully integrating acquired businesses, and realizing manufacturing and operational efficiencies," said Jackson.
"We value Sanyo Semiconductor’s customer knowledge and understanding, and look forward to building upon these important long-standing relationships. Our goal is to continue the structural transformation efforts begun by Sanyo Electric. We welcome Sanyo Electric as a shareholder and hope to build a collaborative long-term relationship."
Sanyo Electric is expected to receive approximately $129 million (¥11.6 billion) in cash and approximately $238 million (¥21.4 billion) worth of On Semi common stock, expected to equal approximately 7 to 8 percent of ON Semi's fully diluted shares outstanding, subject to adjustment at closing. On Semi has the option to replace the stock consideration with cash at closing.
"Although semiconductor valuations are currently depressed, we believe we have acquired the business for an agreeable price, with negligible dilutive impact to ON Semiconductor in the near term, and do not foresee the need for additional debt financing at this time," said Donald Colvin, On Semi executive vice president and CFO.
Colvin said On Semi expects to produce $30 million of pre-tax income per quarter from Sanyo within 18 months.