Infineon digs deep to buy Cypress in $10 billion deal

Investors took a dimmer view, however, sending shares in Infineon almost 8% lower on fears that it was overpaying in a transaction that will be 30% financed through equity, with the rest paid for in debt and cash.

One trader speculated that Infineon could itself become a takeover target after the company twice lowered its revenue guidance this year as demand in China slowed and trade frictions escalated between Washington and Beijing.

The deal made sense on a technology basis, but represented “a cycle peak price” at a time when the industry is at a cyclical trough and visibility is low, said Mirabaud Securities analyst Neil Campling.

Infineon said it expected the deal, subject to regulatory approval, to close by the end of this or in early 2020, creating a leader in the automotive sector with a global market share of more than 13%.

The deal represents a bet on the growth of the so-called Internet of Things (IoT), the universe of connected devices ranging from robots to refrigerators that is expected to expand rapidly in the years ahead.

Infineon’s leverage ratio, measured as gross debt to earnings before interest, taxation, depreciation and amortization (EBITDA) will exceed a target of two times before returning to that level in late 2022.

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