Infineon Technologies AG, Germany’s largest chipmaker, is the front-runner to acquire Fairchild Semiconductor International Inc. because it’s willing to pay more for the company, people with knowledge of the matter said.

Infineon has begun lining up financing for a deal, said three of the people, who asked not to be identified because the discussions are private. ON Semiconductor Corp. is still interested but isn’t as likely to offer as much as Infineon, the people said. Talks are continuing and there’s no guarantee a deal will be completed, the people said.

Fairchild, with a market value of about $1.9 billion, makes semiconductors that regulate power in electronics, chips for cars and electronic signal converters. Infineon, with a market value of about 12.9 billion euros ($14 billion) would gain more resources and scale with the acquisition, after agreeing to buy International Rectifier for about $3 billion last year.

A spokesman for San Jose, California-based Fairchild didn’t immediately return calls seeking comment, while a spokesman for Neubiberg, Germany-based Infineon declined to comment. A representative for On Semiconductor, based in Phoenix, declined to comment.

STMicroelectronics NV, which also explored an acquisition of Fairchild, has no plan to make an offer for the company, Chief Executive Officer Carlo Bozotti said on an earnings conference call last week. Mergers and acquisitions may be of interest to the company, but that’s not on the table at the moment, he said.

Makers of semiconductors have announced more than $95 billion in mergers and acquisitions this year, the highest annual tally on record and up more than 400 percent from a year ago. That number could climb even higher: Maxim Integrated Products Inc. is in talks with both Analog Devices Inc. and Texas Instruments Inc. about being acquired.

The rush of deals stems from the rising costs of designing chips while sales growth slows. Buying companies rather than investing in new manufacturing and design technologies has become cheaper and more feasible for chipmakers looking to broaden their business.

By: DocMemory
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