updated - May 28, 2020 Thursday EDT
ON Semiconductor Corp. has announced in a press release that it will be acquiring Fairchild Semiconductor for $2.4 billion in cash.
The acquisition will allow ON Semiconductor to be a global leader in the power semiconductor market.
ON Semiconductor said in the press release that the two companies will have combined revenue of approximately $5 billion.
The combined company will also have a diversified portfolio across multiple markets that have a strategic focus on automotive, industrial and smartphone end markets.
Keith Jackson, the president and CEO of ON Semiconductor, said in the press release that the plan is to "bring together two companies with complementary product lines."
He said that the combined company can "offer customers the full spectrum of high, medium and low voltage products."
He adds in the press release that the acquisition of Fairchild is also an excellent opportunity for the company's stockholders.
"The immediate EPS accretion and potential to significantly augment ON Semiconductor's free cash flow," he said.
Mark Thompson, the chairman and CEO of Fairchild, adds in the press release that they look forward to working closely with ON Semiconductor for "a smooth transition."
"As part of ON Semiconductor, Fairchild will continue to pioneer technology and design innovation in efficient energy consumption to help our customers achieve success and drive value for our partners and employees around the world," he said.
Reuters adds that ON Semiconductor's acquisition of Fairchild is the latest on a rapidly consolidating industry as companies seek to cut costs, meet the demand for cheaper chips and diversify their portfolio.
Thomson Reuters' data shows that mergers and acquisitions in the semiconductor industry have topped $80 billion so far this year globally.
Reuters adds that analysts believe the acquisition of Fairchild is for ON Semiconductor to keep it out of the hands of other competitors.
This includes China's Tsinghua Unigroup Ltd, who is aiming to be the world's number three.
ON Semiconductor said in the press release that the transaction will be immediately accretive to the company's non-GAAP earnings per share and free cash flow.
The company also anticipates achieving annual cost savings of $150 million within 18 months following the close of the transaction.
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