Onsemi makes play for Allegro MicroSystems again, values rival at $6.9 billion

U.S. chipmaker Onsemi is making another attempt to acquire smaller rival Allegro MicroSystems for cash, after being rebuffed repeatedly over the past six months, as it looks to ride out a prolonged slump in demand for automotive chips.

Onsemi has offered $35.10 for each Allegro share, it said on Wednesday, higher than its previous offer of $34.50 made in 2024.

The offer values Allegro at an implied enterprise value of $6.9 billion, inclusive of debt, Onsemi said.

The larger rival, which recently rolled out a cost-cutting plan, intends to fund the takeover using committed financing, cash, and a revolving credit facility.

The deal “would bring two highly complementary businesses together,” Onsemi’s chief Hassane El-Khoury said in a statement.

Automotive chipmakers have faced weak demand as automakers struggled to clear excess chip inventory built up during the COVID-19 pandemic while buyers pulled back on big purchases due to an uncertain macroeconomic backdrop.

Onsemi last month forecasted its first-quarter revenue below Wall Street expectations.

Meanwhile, Allegro, which appointed company veteran Mike Doogue as CEO in February, is expected to buck market weakness and return to revenue growth after almost five quarters of declines, according to LSEG data.

New Hampshire-based Allegro provides power management systems used in EVs and traditional vehicles, as well as chips essential for systems that assist vehicles brake and steer.

It had a market capitalization of about $4.93 billion as of Wednesday’s close, according to data compiled by LSEG.

Onsemi’s latest offer is at a premium of about 31 per cent to Allegro’s last closing.

Allegro’s shares rose 22 per cent on Monday to as high as $27.31 after a Bloomberg News report over the weekend suggested the company is drawing takeover interest from Onsemi.

Allegro did not respond to a Reuters request for comment outside working hours late on Wednesday.

The deal would require Onsemi to take on Allegro’s debt of about $507 million as of December 27.

As of December 31, Onsemi’s cash and cash equivalents stood at $2.69 billion, while its total liabilities, including long-term debt, were at $5.26 billion.