Adding to its high gross margin analog and mixed-signal product offerings for the digital consumer and wireless end-markets, Phoenix, Ariz.-based ON Semiconductor Corp said today it would acquire Santa Clara, Calif.-based Catalyst Semiconductor Inc in an all-stock transaction in which Catalyst shareholders will receive 0.706 shares of ON Semi common stock for each share of Catalyst common stock owned, representing an equity value of approximately $115 million and an enterprise value of approximately $85 million.

Under the terms of the agreement, which has been approved by both boards of directors, the fixed exchange ratio will be 0.706 shares of ON common stock for each share of Catalyst common stock, which, based on the closing stock price of ON on July 16, represents a value to Catalyst shareholders of approximately $6.24 per share. Following completion of the transaction, ON said it will issue approximately 13 million shares of common stock on a fully diluted basis to complete the transaction or approximately 3% of ON’s fully diluted shares outstanding.

The companies expect the transaction to close in Q4, whereby ON may record a one-time charge for purchased in-process R&D expenses and other deal related costs, with the amount of that charge not yet determined.

Keith Jackson, ON Semi president and CEO commented in a statement, “Catalyst Semiconductor’s analog and mixed-signal business represented more than $11 million in sales as of their April 2008 fiscal year end - a business that grew more than 90% versus the prior year.”

ON believes Catalyst’s EEPROM technology will strengthen its custom ASIC and power products capabilities thereby expanding its ability to address customer needs. 

“With the combination of ON Semiconductor's global footprint, effective channels of distribution, and top-tier customer relationships, we expect to be able to support a broader and deeper penetration of Catalyst's overall product portfolio. This should enable us to accelerate their revenue growth and increase market share. We also believe additional revenue from Catalyst Semiconductor’s strong portfolio offering will benefit from ON Semiconductor’s manufacturing capabilities,” Jackson continued.

Gelu Voicu, CEO of Catalyst Semiconductor added, “This transaction represents a compelling opportunity for Catalyst employees, customers and shareholders. To compete successfully in today’s global marketplace, size and scale are very important. We are pleased to become part of a leading global company in the semiconductor sector. ON Semiconductor’s world-class operational capabilities and supply chain will enable Catalyst Semiconductor’s products to better penetrate the automotive, consumer, and industrial end-markets utilizing ON Semiconductor’s global customer and channel footprint.”

“This acquisition is directly aligned with both our strategic and financial goals. Net of cash and short term investments of approximately $30 million at the end of April 2008, the transaction value represents approximately 1.1 times trailing twelve month sales,” noted Donald Colvin, ON executive VP and CFO. 

“We also believe ON Semiconductor’s operational strengths will significantly benefit the revenue and margin potential of Catalyst Semiconductor,” he explained, and also noted that ON’s integration of AMIS Holdings Inc has proceeded as anticipated and the company is comfortable with the guidance and current level of revenue and earnings expectations provided on its May 5 conference call. “We intend to provide further details on the acquisition and our second quarter 2008 results on our regularly scheduled quarterly earnings conference call on August 6.”

Shares of the combined company will trade on the NASDAQ Global Exchange under the symbol “ONNN.”

Also this week, ON Semi announced that it is planning a new R&D center in Ireland, which at full capacity, will employ 49 people, 28 of whom are already in place. However, while any jobs are welcome in the layoff-ridden semiconductor industry, the 21 new positions compare to 200 job cuts ON Semi announced in March, many of which impacted employees in the United States.

By: DocMemory
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