Fairchild Semiconductor International (NYSE:FCS) said Monday it will buy Intersil Corporation's (Nasdaq: ISIL) discrete power business.
Intersil shares were off 0.43 to 28.87 Monday following the news, while shares of Fairchild were up 0.06 to 17.56. The stock has revived from a 52-week low of 11.19, despite a warning about its fourth quarter.
The agreement calls for Fairchild to pay $338 million in cash.
"A cash deal made sense to us versus equity because (Fairchild) shares are very undervalued now," said Fairchild CFO Joe Martin in a phone interview Monday.
Look for more acquisitions from Fairchild. Martin said Fairchild will be aggressive on the acquisition front, to enter new regions and markets. He added that the company is interested in Europe, for both communications and industrial business.
"A couple quarters of softness aren't going to stop us from growing our business," Martin said.
Fairchild expects the deal to add to earnings this year. Martin said the company will give specifics on the deal's financial impact when it reports quarterly results after the market closes January 23.
The Intersil deal bolsters Fairchild's discrete power business. Discrete components -- electronic devices built as a single unit, as opposed to as an integrated circuit -- are used for communications applications. It also marks a move for Fairchild into the automotive and aerospace industries.
Intersil's discrete power operations are profitable with more than $200 million in annual sales. Buying Intersil puts Fairchild's discrete business on pace to hit $1 billion in annual revenue.
"With this acquisition, we will have quadrupled our discrete business in less than four years," CEO Kirk Pond said in a statement.
Intersil's manufacturing plant for 8-inch silicon wafers is one of the most efficient in the industry, Pond said. Adding that capacity means Fairchild won't have to increase capital spending to expand its discrete and power analog business, he added.
Fairchild expects to close the transaction in the first quarter of 2001.