This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Infineon Technologies, the listed German semiconductor company, could soon launch a capital raise, banking sources told mergermarket.
Infineon is facing upcoming maturities of EUR 915m: a EUR 700m convertible bond due in June 2010 and a EUR 215m exchangeable bond due in August 2010, according to its website. Last month, the German company bought back bonds to reduce debt by a nominal EUR 53m. Last week, it raised its guidance for the third quarter, with revenues expected to increase “by a low-teens percentage sequentially,” against guidance of a 10% increase.
With its share price closing today at EUR 2.53, sector bankers believed that Infineon was now in a position of strength to launch a rights issue.
“On the situation of our refinancing, we’re looking at all possibilities,” a spokesperson for Infineon commented, while declining to give further details.
On 18 May, Infineon announced it successfully placed a EUR 195.6m convertible bond. ”After the convertible, the rights issue would be an obvious thing to do,” one banker said.
One industry source said that between EUR 250m and EUR 400m could be raised in a market that was described as mature enough for a semiconductor rights issue amid the first signs of a recovery in the sector.
In January this year, Infineon wrote to its shareholders asking for authorization for a potential capital raising of up to EUR 450m within the next five years. At the time, this news service reported that an imminent rights issue was unlikely because German law stipulates that in order to complete a capital increase, Infineon needs to trade above EUR 2 per share. It was then trading at EUR 1.11 per share.
Meanwhile, the bankers said that in the longer term, Infineon could also dispose of some assets in an attempt to focus on its core Automotive and Industrials sectors, the bankers said.
Asset disposals would make strategic sense, a second banker said, adding that the company needs to figure out what to do with its wireless business. Infineon missed out on some wireless consolidation waves, he said, noting that the company’s wireless division would need hefty scale to remain profitable in the long-term.
The spokesperson said Infineon was not considering selling its wireless business.
Potential buyers for the wireless business include Santa Clara, California-based semiconductor chip maker, Intel (NASDAQ:INTC), Californian communications chipmaker Broadcom (NASDAQ: BRCM) and, despite some potential overlaps and cultural issues, Marvell Technology, the Bermuda listed semiconductor company, he said. In Asia, MediaTek, the listed Taiwan-based integrated circuit design house, could also be interested, but cultural issues could get in the way, he added.
Another potential disposal candidate could be the wireline business, the second banker said.
The wireless and wireline businesses compose the Communication Solutions division, which posted sales of EUR 1.1bn in 2008.
Infineon would want to be consolidated from a position of strength, the same banker said. Six months ago they were not in a position of strength, now they are. On the other hand, he noted that there is less urgency to do something now and it is probably not the right time to sell a business.
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