onsemi Synaptics Acquisition Drops to $5.7B All-Cash Deal

On Thursday, onsemi rewrote one of the year's notable chip deals. The semiconductor company amended its merger agreement to acquire Synaptics in an all-cash transaction paying $123 a share, valuing the target at about $5.7 billion. The onsemi Synaptics acquisition had been an all-stock agreement since June, and the switch came after an unsolicited competing proposal for Synaptics emerged, according to the Wall Street Journal. Both companies' boards approved the amended terms, and the announcement sent both stocks higher in after-hours trading.

Under the original June terms of the onsemi Synaptics acquisition, Synaptics shareholders were to receive 1.350 onsemi shares for each Synaptics share, implying a deal value near $7 billion and a premium of about 19 percent over the stocks' ten-day volume-weighted average prices. Synaptics holders would have owned roughly 12 percent of the combined company. Since the June announcement, onsemi's stock has slid from $118.74 on the day of signing to about $80 a share, which changed the economics of the fixed share exchange. The cash revision removes that uncertainty for both sets of shareholders.

Investors welcomed the change. Synaptics shares surged 16 percent to $122.85 in after-hours trading on Thursday, while onsemi shares climbed 6.9 percent to $85.57, the Journal reported. Synaptics chief executive Rahul Patel said the shift to cash gives holders value certainty at a meaningful premium to the current price. A fixed cash price means Synaptics investors no longer need to track onsemi's stock price to know what their shares are worth, and onsemi shareholders avoid dilution entirely.

Why the terms changed

The catalyst was a rival bid the companies did not name. According to the SEC filing described by Markets Daily, the amendment followed an unsolicited competing proposal, which led the Synaptics board to favor the certainty of cash. onsemi chief executive Hassane El-Khoury said in a statement that the revised merger agreement represents a more financially attractive transaction for onsemi's shareholders, with a lower total cost than the original deal. He added that the transaction is now expected to be immediately accretive to adjusted earnings per share upon closing, improving on the original timetable.

The new structure also simplifies the boardroom. The amended agreement drops a requirement that onsemi appoint a Synaptics board member to its own board, the filing shows. If the deal closes, Synaptics would become a wholly owned subsidiary of onsemi, funded by cash on hand and committed debt instead of a share exchange.

Funding lined up, closing expected next summer

onsemi has signed a commitment letter with Morgan Stanley Senior Funding for up to $2.45 billion of senior secured term loan financing to help fund the onsemi Synaptics acquisition. The filing states that the financing is not a condition of closing, so the deal does not depend on the loan. The companies still need approval from Synaptics shareholders and the remaining regulatory clearances, and the transaction is expected to close by the middle of next year.

On the regulatory front, the United States Federal Trade Commission has already cleared the transaction, while regulators in other jurisdictions are still reviewing it, Markets Daily reported. Synaptics plans to file a preliminary proxy statement within ten days of the amended agreement and to hold a stockholder meeting within thirty days after learning whether the SEC staff will review the filing or has no further comments.

What the deal says about chip consolidation

Strategically, onsemi says Synaptics fits its push into AI data centers and adds human-machine interface and sensing products to its portfolio through the onsemi Synaptics acquisition. The companies continue to target about $200 million in annual run-rate synergies, and onsemi has pointed to further upside from revenue synergies and the insourcing of Synaptics' production, with those additional benefits expected about eighteen months after closing.

The episode also shows that a signed merger is not always the final word. An unnamed rival's approach sent both boards back to the table and produced a cheaper, simpler deal for the buyer and a certain cash payout for the seller's shareholders. Synaptics shareholders still have to vote, and regulators outside the United States still have to weigh in, before the deal can close.