Tuesday, June 4, 2019

Infineon Scoops Up Cypress

Follow the markets long enough and you'll encounter a few moments that make you think the market is both sentient and messing with you - to that end, Cypress (CY) was on my to-do list today and then I woke up to the news that Infineon (OTCQX:IFNNY) and Cypress had agreed to a $10B buyout. While Cypress shares had done well since my last (bullish) article on the company in early January, this deal is certainly a nice capper on that share price move.

All in all, I think this is a reasonable deal for both parties. While Infineon is paying a rich-looking premium based on current margins, 2019 is likely to be an anomaly that doesn't reflect the real strength of the business. Moreover, I think the financial and operation synergy potentials are significant, and I believe Cypress's MCU and connectivity technologies will be valuable additions to Infineon's portfolio. For Cypress, while the company's growth plan could well have improved the business to a point where it would get this sort of valuation down the line, this deal takes execution risk off the table and gives shareholders a very fair multiple for the business.

Read more here:
Infineon Scoops Up Cypress

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