Infineon Technologies AG is a leading German designer, developer and manufacturer of semiconductors and related system solutions. The Company operates through four segments: Automotive; Industrial Power Control; Power Management & Multimarket; and Digital Security Solutions. In 2018, Infineon had revenues of €7.6bn and EBITDA of €2.3bn.
On 2nd June 2019, Infineon announced its acquisition of Cypress Semiconductor Corporation in an all-cash deal worth €9bn.
Financing of the acquisition required a €3bn capital raise, in the form of an all-Primary Accelerated Bookbuild (ABB).
The €1.55bn ABB was launched on Monday 17th June following sufficient feedback and demand indications from investors on the back of a non-deal roadshow after the merger announcement.
Books were covered after 30 minutes and closed 2.4x oversubscribed at €13.70 per share – a 4.6% discount to last close.
STJ provided advice on all key aspects of the transaction:
- A review of available equity funding options, taking into account: uncertainties in timing and regulatory approval; poor share price performance resulting from the large equity overhang; dilution risks for Infineon shareholders; and launch window considerations.
- STJ considered, reviewed and contrasted each of: a full size, pre-emptive equity offering (rights issue); a pre-emptive offering with part-paid feature; a mandatory convertible bond; and a best efforts, backstopped or underwritten ABB up to 10% of the company.
- After considering both the sector and macro risk background it was decided to focus on an ABB prior to the end of June.
- STJ conducted a detailed analysis of investor feedback, constructing an indicative shadow book from the recent roadshow that showed much lower levels of LO demand from existing shareholders than indicated by the banks.
- On the back of this analysis, STJ advised holding off on launch until further visibility of LO or quasi LO demand was available. This materialised in meaningful size on Thursday night.
- Given the uncertain market conditions, STJ advised Infineon to request price quotes from the banks for a best efforts, backstop plus upside and fully underwritten deal at different size levels.
- Despite a major profit warning from another company in the same sector on the Friday before launch, the banks improved their backstopped bid on Sunday, from their original quote on Friday afternoon, providing Infineon and STJ comfort in the JGCs level of confidence in execution.
- Following this, signs of market stability on Monday and an extensive wall crossing exercise to de-risk execution, the decision was made to launch after close on a backstop plus upside basis.
- The majority of the allocation was to LO & quasi-long HF investors, allowing heavy scaling back of allocations to pure HF investors, resulting in strong share price performance post-pricing.