Story
ON Semiconductor Stock Jumps on Revised All-Cash Deal for Synaptics
Summary
Shares of the chipmaker surged after it announced a new, cheaper all-cash deal to acquire Synaptics for $5.7 billion, a move that avoids shareholder dilution and is expected to be immediately accretive to earnings.
ON Semiconductor (NASDAQ: ON) shares surged after the company announced a revised, all-cash acquisition agreement for Synaptics (NASDAQ: SYNA), securing the deal at a significantly lower valuation than a previously proposed all-stock transaction.
Revised Acquisition Terms
Onsemi will now acquire Synaptics in an all-cash transaction valued at approximately $5.7 billion, or $123 per share. This amends the original all-stock deal, which was valued at $7 billion. The company stated the change followed an unsolicited competing offer for Synaptics from an undisclosed party, which ultimately led to more favorable terms for onsemi.
The new structure is a notable positive for onsemi investors, as it represents a substantial discount from the initial agreement and removes the risk of shareholder dilution associated with an all-stock offer.
Financial and Strategic Impact
A key benefit of the revised agreement is that the transaction is now expected to be immediately accretive to onsemi’s non-GAAP earnings per share upon closing. The company also noted it has identified additional value opportunities beyond the previously announced $200 million in annual run-rate synergies, including potential revenue synergies and the insourcing of some of Synaptics' production.
AdAccording to the announcement, the acquisition will be funded through a combination of cash on hand and committed debt financing from Morgan Stanley, with no financing condition attached to the deal's closing.
Market Reaction
Investors reacted positively to the news, with shares of ON Semiconductor jumping 6.5% in pre-market trading on October 2. The stock's advance was also supported by a broader rally in the semiconductor sector, which was lifted by strong quarterly results from Micron Technology and a slight pullback in U.S. Treasury yields.
Following the announcement, Robert W. Baird analyst Tristan Gerra reiterated a Hold rating on the stock with a $108 price target, according to Investing.com.
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