Infineon Purchase Of Cypress To Create No. 1 Auto Chip Supplier

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Infineon Technologies on Monday announced an agreement to buy Cypress Semiconductor (CY) in a deal worth about $10 billion. The combination will create the No. 1 supplier of automotive chips.

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Germany's Infineon will pay $23.85 a share for Cypress Semiconductor. That is 55% above its closing price on May 28, before news of the acquisition leaked. Cypress stock soared by 23.5% near 22 during morning trades on the stock market today.

"The planned acquisition of Cypress is a landmark step in Infineon's strategic development," Infineon Chief Executive Reinhard Ploss said in a news release. "This will open up additional growth potential in the automotive, industrial and Internet of Things sectors."

The companies expect the transaction to close by the end of 2019 or early 2020, pending regulatory approvals.

Cypress Semiconductor Purchase Faces Regulatory Scrutiny

Infineon's purchase of Cypress Semiconductor stands a better chance of being approved than its failed purchase of Cree's (CREE) Wolfspeed unit, Mizuho Securities analyst Vijay Rakesh said in a report Monday. The Committee on Foreign Investment in the United States (CFIUS) blocked Infineon's Cree purchase on national security grounds in 2017.

Infineon said the Cypress acquisition will increase its scale and broaden its business base. It combines Infineon's sensors, power and security chips with Cypress Semiconductor's microcontroller and connectivity chips. The combined company will be the eighth largest semiconductor company.

The combination will make Infineon the top supplier of automotive semiconductors. The two companies supply chips for infotainment, power train, braking, safety and other systems. NXP Semiconductors (NXPI) is currently the No. 1 automotive chip supplier.

Chip Sector Active For Mergers And Acquisitions

The semiconductor industry has seen a flurry of mergers and acquisitions lately.

Last week, NXP announced a deal to buy Marvell Technology Group's (MRVL) wireless connectivity portfolio for $1.76 billion.

In May, Marvell agreed to buy two chipmakers: Aquantia (AQ) and Avera Semiconductor. It is buying Aquantia for $452 million and Avera for as much as $740 million.

On March 27, ON Semiconductor (ON) announced an agreement to buy Quantenna Communications (QTNA) for $1.07 billion.

On March 11, Nvidia (NVDA) agreed to buy Mellanox Technologies (MLNX) for $6.9 billion.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.

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