In an interesting turn of events, CREE has announced the successful acquisition of the RF Power Business of Infineon Technologies for approximately € 345 million. This acquisition will expand the market opportunity for CREE's Wolfspeed business unit.
In July 2016, Infineon had tried to acquire Wolfspeed from CREE for $850 Million. However, the transaction was blocked by the US Government in Feb 2017. Once this was blocked, CREE re-evaluated their position on the RF Power Business and decided to put significant resources to grow this business. This acquisition shows their commitement to this segment.
The acquisition of Infineon strengthens Wolfspeed’s leadership position in RF GaN-on-SiC technologies, as well as provides access to additional markets, customers and packaging expertise. This is a key element of Cree’s growth strategy and positions Wolfspeed to enable faster 4G networks and the revolutionary transition to 5G.
Infineon and Cree have a long-standing history of technology leadership, collaboration and shared business interests. The acquired Infineon RF Power team and capabilities will complement Wolfspeed’s existing offerings and expertise with additional technology, design, packaging, manufacturing, and customer support. This business holds a leading market position offering transistors and MMICs (Monolithic Microwave Integrated Circuits) for wireless infrastructure radio frequency power amplifiers based on both LDMOS and Gallium Nitride on Silicon Carbide (GaN-on-SiC) technologies.
The transaction includes the following:
- The main facility in Morgan Hill (CA) which includes packaging and test operations for LDMOS and GaN-on-SiC
- Well-established customer relationships with leading manufacturers of wireless infrastructure equipment, including field support personnel on site
- Approximately 260 employees in the US locations, Morgan Hill and Chandler (AZ), as well as in Finland, Sweden, China and South Korea
- A transition service agreement to ensure business continuity and a smooth transition under which Infineon will perform substantially all business operations for approximately the next 90 days.
Infineon will support the transaction with a long-term supply agreement for LDMOS wafers and related components out of its fab in Regensburg, Germany, and will also supply assembly and test services out of its facility in Melaka, Malaysia.
The transaction comprises Infineon’s RF Power operations for wireless infrastructure in Morgan Hill (CA) and Chandler (AZ) in the U.S., as well as locations in China, Sweden, Finland and Korea. The state-of-the-art backend manufacturing in Morgan Hill, as well as a leading intellectual property (IP) and technology portfolio are also part of the transaction. Though, it does not include the Infineon Chip Card & Security (CCS) operations in Morgan Hill that will remain at the site and continue to operate as part of Infineon.
Cree funded the Euro 345 million from cash and borrowings on its revolving line of credit. The Infineon RF Power business will become part of Cree’s Wolfspeed operating segment and is targeted to increase annual revenues by approximately $115 million in the first twelve months post acquisition. Additionally, the acquisition is targeted to be accretive to Cree’s non-GAAP earnings per share in its first full quarter of operations with Cree (which will be Cree’s fiscal fourth quarter ending June 24, 2018). Targeted non-GAAP earnings per share exclude expenses related to the amortization of acquired intangibles, stock based compensation expense and one-time acquisition related expenses.
In connection with the transaction, Wells Fargo Securities, LLC served as financial advisor to Cree and BofA Merrill Lynch to Infineon.