Infineon acquiring Wolfspeed for $850M in cash

Infineon Technologies AG and Cree Inc. announced that Infineon has entered into a definitive agreement to acquire the Wolfspeed Power and RF division of Cree. The deal also includes the related SiC wafer substrate business for power and RF power. The purchase price for the all-cash transaction is $850 million (approximately €740 million). This acquisition will enable Infineon to provide the broadest offering in compound semiconductors and will further strengthen Infineon as a leading supplier of power and RF power solutions in high growth markets such as electro-mobility, renewables and next-generation cellular infrastructure relevant to IoT.

Cree’s Board of Directors and Infineon’s Supervisory Board have approved the acquisition. The closing of the transaction is subject to regulatory approvals in various jurisdictions and is expected by the end of calendar year 2016.

The business to be acquired by Infineon has generated pro-forma revenues of $173 million in the twelve months ending March 27, 2016. The acquisition will be immediately accretive to Infineon’s adjusted earnings per share and margin. Infineon will fund the transaction with bank financing of $720 million and $130 million from cash-on-hand. Infineon’s capital structure will stay within the previously communicated targets of €1 billion gross cash plus 10 to 20 percent of revenue and no more than 2x the gross debt-to-EBITDA.

Dr. Reinhard Ploss, CEO of Infineon, said:,“Joining forces with Wolfspeed represents a unique growth opportunity. Wolfspeed’s and Infineon’s businesses and expertise are highly complementary, bringing together industry leading experts for compound semiconductors. This will enable us to create additional value for our customers with the broadest and deepest portfolio of innovative technologies and products in compound semiconductors available in the market. With Wolfspeed, we will become number one in SiC-based power semiconductors. We also want to become number one in RF power. This will accelerate the market introduction of these innovative technologies, addressing the needs of modern society — such as energy efficiency, connectivity and mobility.”

Chuck Swoboda, Cree chairman and CEO, said, “After much consideration and due diligence over the past year, we concluded that selling Wolfspeed to Infineon was the best decision for our shareholders, employees and customers. We believe that Wolfspeed will now be able to more aggressively commercialize its unique SiC and GaN technology as part of Infineon.”

Frank Plastina, Wolfspeed CEO, said: “By joining the Infineon team, Wolfspeed will now have all the advantages of a global company in our sector, including the ability to leverage Infineon’s market reach and infrastructure. With Infineon’s complementary culture and additional investment, we’ll be better positioned to unlock the potential of our portfolio and our people.”

Wolfspeed is based in Research Triangle Park, North Carolina, and has been a part of Cree for almost three decades. Wolfspeed provides SiC-based power and GaN on SiC-based RF power solutions. This also includes the related core competencies in wafer substrate manufacturing for SiC, as well as for SiC with a monocrystalline GaN layer for RF power applications. With these competencies, more than 550 employees and a strong IP portfolio of approximately 2,000 patents and patent applications, this deal complements Infineon’s previous acquisition of International Rectifier in early 2015. Wolfspeed’s SiC-based product portfolio adds to Infineon’s offering.

According to Infineon, power management solutions based on compound semiconductors have several advantages, enabling systems with higher energy efficiency, smaller footprints and lower system costs. Combining their portfolios of technologies, products and manufacturing capabilities, Infineon and Wolfspeed plan to accelerate the development of components, which will enable customers to develop differentiating systems. Major applications that will profit from SiC are renewables and, especially, automotive. Both areas benefit from increased power density and improved efficiency. In automotive, SiC fits well with the recent increased commitment of the industry to plug-in hybrid and all-electric vehicles (xEV).

Next-generation cellular infrastructure standards such as 5G will use frequencies up to 80 GHz. Only advanced compound semiconductors can deliver the required efficiencies at these high frequencies. GaN on Si allows higher levels of integration and offers its advantages up to 10 GHz. GaN on SiC enables maximum efficiency at frequencies of up to 80 GHz. Both technologies are crucial for next generation cellular infrastructure standards. Together with its Si-based LDMOS products, Infineon now claims to be the industry’s most complete provider for RF power components.

The combined portfolio advances Infineon’s strategic “product to system” approach.