Infineon denies paying too much for International Rectifier

Premium of 50 per cent justified by likely synergies, says company

Infineon brushed off concern that it was spending too much to buy US-based International Rectifier, saying the $3 billion (€2.25 billion) cash deal promised a wealth of benefits for the German chipmaker.

The price was 51 per cent above International Rectifier’s market value before the deal was announced late on Wednesday and Infineon shares fell in after-hours trading.

Infineon finance chief Dominik Asam said yesterday that chip-sector premiums were high "but the 50 per cent we are offering is pretty much in the middle of the bandwidth in this space".

He said he saw “a good bunch of cost synergies” that made him comfortable with the premium Infineon has to pay, without giving more details.

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Analysts said International Rectifier would strengthen Infineon’s position in power-management chips. But integration of the business would need to be flawless to generate the savings required to justify the price.

Infineon's chips activate car airbags, enable cruise control, manage power supplies and cut vehicle emissions. The company has shunned major takeovers since it was spun off from engineering conglomerate Siemens in 1999.

Confident it would make a success of the International Rectifier deal, Bernstein raised its rating on Infineon’s shares to “outperform” from “market perform”, saying it expected cost benefits of about $100 million.

Natixis analysts said they would "be watching closely, as Infineon's track record on M&A is limited and extracting major synergies will be key".

Mr Asam said his team had looked at a “whole bunch” of possible acquisition targets before settling on International Rectifier.

Infineon said it expected International Rectifier’s profitability to be “at least in line with” its own operating margin target of 15 per cent by the second full fiscal year after the deal closes. – (Reuters)