Fairchild Semiconductor International, Inc. announced that its board of directors has determined that the unsolicited proposal received on December 28, 2015, from China Resources Microelectronics Ltd. (CRML) and Hua Capital Management Co., Ltd. to acquire Fairchild is deemed too risky to accept. Lacking further offers from CRML or other sources, the acquisition of Fairchild by ON Semiconductor is now expected to proceed to a successful conclusion.
As stated in a filing with the U.S. Securities Exchange Commission, Fairchild’s Board “concluded that, given the Company would be required to forgo the existing transaction with ON Semiconductor (and the premium agreed to be paid to the Company stockholders in the transaction with ON Semiconductor) in order to enter into a potential transaction with the Consortium, the Company and its stockholders would be bearing an unacceptable level of risk for a failure to obtain Committee on Foreign Investment in the U.S. (CFIUS) approval. Specifically, the Board believed that the Consortium’s proposed $108 million CFIUS reverse termination fee would not adequately justify risking the Company stockholder premium present in the ON Semiconductor transaction in order to seek the incremental $2.00 per share proposed to be paid in a potential $22.00 per Share transaction with the Consortium.
“The Board also evaluated other material risks in the terms being proposed by the Consortium, especially when compared to the transaction with ON Semiconductor, including the execution risk as a result of the added complexity of a transaction with the Consortium, the likelihood that a transaction with the Consortium might require an additional four to eight months to consummate beyond the expected timing to consummate the transaction with ON Semiconductor, enforceability concerns of a transaction with the Consortium in the event of a breach by the Consortium and that the potential maximum scope of recovery available to the Company would be the $300 million letter of credit.
“After weighing these various considerations, the Board concluded that, as compared to the terms of the transaction being proposed by the Consortium, and taking into account prevailing market conditions, the Merger Agreement constituted the highest value proposition reasonably available to the Company’s stockholders.â€
