Littelfuse Inc of Chicago, IL, USA, which provides circuit protection technologies (including fuses, semiconductors, polymers, ceramics, relays and sensors), has agreed to acquire IXYS Corp of Milpitas, CA, USA and Leiden, The Netherlands (which provides power semiconductors and mixed-signal ICs for power conversion and motor control applications) in a cash and stock transaction with an equity value of about $750m (and enterprise value of $655m), representing the largest acquisition in Littelfuse’s 90-year history .
Per share, each IXYS stockholder will be entitled to receive either $23 in cash or 0.1265 of a share of Littelfuse common stock. In total, 50% of IXYS stock will be converted into the cash option and 50% into the stock option.
IXYS focuses on medium- to high-voltage power control semiconductors across the industrial, communications, consumer and medical markets, serving a broad base of more than 3500 customers through its direct salesforce and global distribution partners. In fiscal 2017, revenue was $322m, with an adjusted EBITDA margin of about 13.5%.
The combined company is expected to have annual revenue of about $1.5bn, with the following strategic and financial benefits:
- a broader technology platform and capability to expand growth into industrial and electronics markets;
- increased long-term penetration of power control portfolio in automotive markets (expanding global content per vehicle);
- heightened engineering expertise and intellectual property around high-voltage and silicon carbide semiconductor technologies;
- increased presence in the semiconductor industry, adding to scale and volume; and
- strong relationships and complementary overlap in major global electronics distribution partnerships, enabling cross-selling.
“IXYS’ extensive power semiconductor portfolio and technology expertise fit squarely within our strategy to accelerate our growth within power control and industrial OEM markets,” says Littelfuse’s president & CEO Dave Heinzmann. “The combination of Littelfuse and IXYS unites complementary capabilities, cultures and relationships,” he adds.
“IXYS will operate as the cornerstone of the combined companies’ power semiconductor business,” says IXYS’ chairman & CEO Dr Nathan Zommer. “Both Littelfuse and IXYS have long histories of innovation and customer-focused product development, and together we will embrace the entrepreneurial spirit that has contributed to IXYS’ success in the power semiconductor and integrated circuits market,” he believes.
“The combination of IXYS and Littelfuse creates a stronger player in the power semiconductor industry, with the ability to leverage our collective resources and portfolio,” comments IXYS’ president & CEO Uzi Sasson.
The transaction is expected to be immediately accretive to Littelfuse’s adjusted earnings per share and free cash flow in the first full year post transaction close (excluding any acquisition- and integration-related costs). Littelfuse expects to achieve more than $30m of annualized cost savings within the first two years after closing the transaction. Longer term, the combination is also expected to create significant revenue synergy opportunities, given the companies’ complementary offerings, as well as benefits from future tax rate reduction.
In conjunction with the agreement, Zommer (IXYS’ founder and currently its largest stockholder, with about 21% ownership) has entered into a voting and support agreement. Subject to the agreement’s terms and conditions, he has agreed to vote his shares in favor of the transaction. After close of the transaction, Zommer is expected to join Littelfuse’s board of directors, subject to the board’s governance and approval process. His technical skills and extensive experience across the semiconductor industry are expected to benefit the combined company with its integration efforts, innovation roadmap and revenue expansion.
The transaction is expected to close in first-quarter 2018, subject to customary closing conditions (including regulatory approvals and approval by IXYS stockholders). Littelfuse expects to finance the cash portion of the transaction through a combination of existing cash and additional debt.
