Power Electronics

Acquisitions Herald Changes Across Power Electronics Industry

The ongoing trend toward consolidation in the power electronics industry continues unabated as indicated by recent announcements from power semiconductor and power system suppliers. In just the past two weeks, a series of deals have changed the business landscape for component suppliers and their customers. The latest news includes Vishay’s purchase of IR's Power Control Systems Business and the acquisition of American Power Conversion by Schneider Electric. These announcements come on the heels of Microsemi’s acquisition of PowerDsine and the sale of APD Semiconductor to Diodes Inc.

Earlier today, Vishay Intertechnology (www.vishay.com) and International Rectifier IR) (www.irf.com) announced they have reached an agreement for the sale of IR's Power Control Systems (PCS) business to Vishay. The PCS business includes IR's Non-Focus Products business and certain product revenue from its Focus Products business, including certain discrete planar MOSFETs, discrete diodes and rectifiers, discrete thyristors, and automotive modules and assemblies.

The PCS business accounted for revenue of approximately $300 million, or 26% of revenues in IR's June-ending fiscal year 2006. The PCS business is expected to be sold for approximately $290 million in cash. The agreement is subject to customary closing conditions. Signing of definitive agreements is expected to take place by November 10, 2006. The transaction is expected to close in February 2007, at which point IR plans to update its website to reflect the specific changes that will be made in its product portfolio.

This divestiture enables IR to concentrate its resources on its Focus Products business, which includes high-performance analog, digital, and mixed-signal ICs, and other advanced power management products. Earlier this year, the company announced it was exploring the potential sale of its Non-Focus Products business, which includes both its Non-Aligned Products and its Commodity Products segments.

A presentation available on the Investor Relations page of the IR website, provides some clues as to how the sale of the Non-Aligned Products and the Commodity Products segments will affect IR’s focus on specific application areas. The presentation, which is posted at www.irf.com/investor/IRF_investor_presentation.pdf, indicates that these two business segments are separate from the company’s Computing & Communications, Energy Saving Products, Aerospace & Defense, and Intellectual Property segments. Therefore, the sale can be interpreted as an effort to focus more heavily on these four business segments.

For some additional insights into the IR-Vishay agreement, readers may tune into IR’s conference call tomorrow afternoon. In that call, IR’s CEO Alex Lidow and CFO Mike McGee will discuss the company's September-quarter results and December-quarter outlook. However, the call also provides a forum for investors to broach questions about today’s announcement. Participants may join the call by dialing 212-896-6018 by 2:10 p.m. Pacific time, or may listen over the Internet at investor.irf.com

For Vishay, the acquisition extends the company’s product offering in discrete semiconductors and modules, while enhancing its position as one of the industry's largest manufacturers of discrete semiconductors and passive components. Furthermore, this acquisition will provide Vishay with synergies in the area of modules by combining Vishay components with the product lines to be acquired from IR.

On Monday, American Power Conversion (www.apcc.com), a provider of power availability solutions, and Schneider Electric SA (www.schneider-electric.com), a provider of solutions for electrical distribution, industrial control and automation projects, announced that the two companies have executed a definitive merger agreement under which Schneider Electric will acquire all outstanding shares of APC for $31.00 per share in cash. The aggregate transaction value is approximately $6.1 billion.

According to APC, the combination of these two businesses will create an industry leading business for both single-phase and three-phase uninterruptible power supply (UPS) systems as well as the preeminent provider of integrated systems for IT and data center applications.

Rob Johnson, APC's president and chief executive officer, said, "This transaction provides APC stockholders with an immediate and substantial cash premium for their investment in the company. Upon completion of the transaction, APC will become part of Schneider Electric, with greater resources to accomplish our long-term plans, which will be favorable for our employees, customers, business partners and suppliers worldwide."

The transaction, which is expected to close in the first quarter of 2007, is subject to approval by APC shareholders and other customary conditions. APC's products and services for home and corporate environments improve the availability, manageability and performance of sensitive electronic, network, communication and industrial equipment of all sizes. Headquartered in West Kingston, Rhode Island, APC reported sales of $2 billion for the year ended December 31, 2005.

Headquartered in France, Schneider Electric designs, manufactures and sells products, solutions and services for Electric Distribution and Automation & Control. Schneider Electric makes installations safer, monitors equipment and protects people with a lineup devised to save energy, enhance performance and make its customers more competitive. Schneider Electric reported revenue of 11.7 billion in 2005 and had 88,670 employees in 130 countries.

Last week, Diodes Inc.( www.diodes.com), a manufacturer and supplier of discrete and analog semiconductors, announced it has signed an agreement to purchase the assets of APD Semiconductor, a privately held U.S.-based fabless discrete semiconductor company. The asset acquisition includes an approximate $8 million payment for patents, technology, trademarks and net working capital, which is in addition to a potential earnout provision. APD revenue is forecasted to be approximately $2.0 million for 2006, and the transaction is expected to be accretive to Diodes Inc. in 2007.

"The APD acquisition is aligned with our strategy of strengthening Diodes' technology leadership in the discrete semiconductor market and expanding our product capabilities across important segments of our end-markets," said Dr. Keh-Shew Lu, President and CEO of Diodes Incorporated. "With APD's wafer technology and Diodes' world-class packaging capabilities, we will be able to offer a far superior product to the discrete semiconductor market in respect to both cost and performance."

Headquartered in Redwood City, California, APD Semiconductor's main product focus is its Super Barrier Rectifier ("SBR") technology. SBR technology uses a MOS cellular design to replace standard traditional Schottky or PN junction diodes. APD's breakthrough Low VF 300V SBR product line offers Diodes a cost effective solution to break into the higher voltage markets to compete against existing technologies like silicon carbide and gallium arsenide diodes. APD also brings to Diodes intellectual property that includes several trademarks and patents.

Diodes caters primarily to the communications, computing, industrial, consumer electronics and automotive markets. The company's corporate sales, marketing, engineering and logistics headquarters is located in southern California. Diodes’ product focus is on subminiature surface-mount discrete devices, analog power management ICs and Hall-effect sensors.

In another announcement last week, Microsemi, which designs and manufactures high performance analog mixed-signal solutions, reported it has entered into a definitive agreement to acquire PowerDsine Ltd., a company which offers Power over Ethernet (PoE) products and services. With this acquisition, Microsemi, expands its portfolio to include a broad range of PoE solutions and further enhances its strong analog and mixed signal design capabilities.

Under the terms of the agreement, each PowerDsine shareholder will receive $8.25 per share in cash and 0.1498 shares of Microsemi common stock for each share of PowerDsine common stock. Based on closing stock prices on October 23, the total consideration values PowerDsine at $11.00 per share, an 18.5% premium to PowerDsine's last closing stock price, for a total consideration of $245 million on a fully-diluted basis, or $168 million net of cash acquired.

"PowerDsine is a recognized leader in its PoE product offerings for a wide range of rapidly growing applications," said James J. Peterson, Microsemi's President and CEO. "We believe the addition of PowerDsine's experienced team of analog and mixed signal design engineers will yield excellent results both in the PoE market and more broadly across a number of important commercial analog and mixed signal markets we serve today. We are also excited to develop Microsemi's presence in Israel to leverage the country's outstanding engineering talent base."

Microsemi will continue to support PowerDsine's product roadmaps for both the midspan and integrated product lines. PowerDsine employs approximately 136 employees worldwide, and has facilities in Hod Hasharon, Israel; San Jose, California; and Melville, New York. Microsemi is headquartered in Irvine, Calif.

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