Acquired for $2.4 billion... Acquiring complementary lines of high, medium and low voltage products
Strengthening our position in key strategic areas including industrial, automotive and smartphone end markets

ON Semiconductor and Fairchild Semiconductor International announced that they have entered into a definitive agreement under which ON Semiconductor will acquire Fairchild for $20 per share, or approximately $2.4 billion in cash.

This acquisition positions ON Semiconductor as a leader in the power semiconductor market by providing a diversified strategic focus across multiple markets, including automotive, industrial and smartphone end markets, which generate approximately $5 billion in revenue.

“We believe the combination of our two companies will position us as a power semiconductor powerhouse in a rapidly consolidating semiconductor industry,” said Keith Jackson, ON Semiconductor’s chairman and CEO. “This acquisition will enable us to offer our mutual customers a diverse range of complementary product lines across high, medium and low voltage product groups,” he added. “ON Semiconductor’s immediate EPS accretion and potential for measurable free cash flow (FCF) growth are also expected to make this acquisition highly profitable for our shareholders.”

“As part of ON Semiconductor, Fairchild will continue to pioneer energy-efficient technologies and design innovations that help our customers succeed in their businesses, while adding value to our partners and customers around the world,” said Mark Thomson, Fairchild Chairman and CEO . “We look forward to working closely with the ON Semiconductor team to complete the transaction smoothly.”

Expected to save $150 million in annual operating expenses within 18 months of acquisition

The acquisition is expected to be immediately accretive to non-GAAP earnings per share (EPS) and free cash flow (FCF) upon closing (excluding one-time acquisition-related costs, fair value amortization of inventory, and amortization of intangible assets). ON Semiconductor expects to reduce annualized operating expenses by $150 million within 18 months of closing.

The acquisition is not contingent on financing. ON Semiconductor expects to complete the transaction with cash from $2.4 billion of new debt on the combined companies' balance sheets. Debt obligations include $300 million of undrawn revolving credit facility. ON Semiconductor remains committed to the share repurchase program, and the financial terms agreed upon by the two parties include the ability to continue to repurchase shares flexibly.

Under the terms of the definitive agreement agreed upon by the parties, ON Semiconductor will begin making cash payments to stockholders for the acquisition of Fairchild's outstanding shares of common stock at a purchase price of $20.00 per share.

Upon the completion of all required regulatory approvals and other customary closing conditions and the purchase of all shares described in this transaction, the agreement between the parties will result in an immediate and effective merger, with all shares not yet tendered for the public offering being purchased at a cash price of $20.00 per share.

The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the second quarter of 2016. The transaction does not require approval from ON Semiconductor stockholders.

Deutsche Bank is acting as lead financial advisor to ON Semiconductor for this transaction, with Morrison & Forrester acting as legal advisor. Boffa Merrill Lynch is also acting as financial advisor, with Deutsche Bank and Boffa Merrill Lynch acting together to provide debt financing for the transaction. Goldman Sachs is acting as sole financial advisor to Fairchild, with Wachtel, Lipton, Rosen & Katz acting as legal advisor.