ON Semiconductor Corporation (NASDAQ: ONNN) announced that it has signed a definitive agreement to acquire voltage regulation and thermal monitoring products for computing applications from Analog Devices, Inc. (NYSE: ADI). Pursuant to the agreement, ON Semiconductor will acquire certain assets and intellectual property related to the product line and will enter into a one-year manufacturing supply arrangement for a total consideration value of approximately $185 million in cash. This amount also includes consideration for the one-year manufacturing supply arrangement. These products represented approximately $80 million in revenue for ADI through the twelve months ended Nov. 3, 2007.
“The technical expertise of the staff is a critical aspect of this transaction,” said Keith Jackson, ON Semiconductor president and CEO. “This additional talent will help ON Semiconductor expand its overall computing power management business and accelerates our notebook power management revenue growth. Along with the products and technology, this team complements ON Semiconductor’s existing Computing Products Group and will provide increased value-add and scale to our customers.”
Pursuant to the agreement, ON Semiconductor will also acquire several ADI issued patents and patent applications related exclusively to the business and receive appropriate intellectual property licenses from ADI in order to continue to conduct and grow the business.
The acquisition is expected to close in December upon the satisfaction of regulatory requirements and other customary closing conditions. Upon closing, ON Semiconductor may record a one-time charge for purchased in-process research and development expenses and other deal related costs. The amount of that charge, if any, has not yet been determined.
This acquisition is expected to enhance revenue and run at a gross margin superior to ON Semiconductor’s existing product gross margin. We currently anticipate providing updated guidance related to this transaction at closing. After paying cash for this transaction, we currently expect that our cash and cash equivalents balance will exceed $200 million exiting this year.
“Based on our third quarter 2007 results, our Computing Products Group is running at an annualized revenue run rate of approximately $375 million,” said Jackson. “The customers and products associated with this end-market are a critical component to our ongoing success and strategy. Once completed, the purchase of the voltage regulation and thermal monitoring business from ADI is expected to accelerate our technology, resources and development capabilities in the computing and related end-markets and will enable ON Semiconductor to develop a larger mix of high-performance analog and power products for our customers. While the manufacturing supply arrangement will help enable the smooth transition of the product portfolio into ON Semiconductor, we believe that over time, the business will benefit greatly from the capabilities of our Gresham wafer fabrication facility.”
About ON Semiconductor
With its global logistics network and strong portfolio of power semiconductor devices, ON Semiconductor (NASDAQ: ONNN) is a preferred supplier of power solutions to engineers, purchasing professionals, distributors and contract manufacturers in the power supply, computer, cell phone, portable devices, automotive and industrial markets.
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