(Bloomberg) -- As Infineon Technologies AG wrapped up a call with reporters on Monday to explain its $10 billion acquisition of Cypress Semiconductor Corp., Chief Executive Officer Reinhard Ploss excused himself to catch a plane. About an hour later, he boarded a flight to San Francisco to lobby for the biggest deal in the German company's history.
If the stock reaction to Infineon's bet is any guide, Ploss will have more traveling and explaining to do in the next few weeks. Infineon was little changed on Tuesday in Frankfurt after slumping 8% on Monday, as investors lamented a high price amid a chip market that's suffering from the U.S.-China trade conflict and slowing demand.
Yet Ploss is adamant the takeover can supercharge sales. After his plane touched down on the U.S. West Coast, the German executive drove to Cypress's headquarters in San Jose, California, to meet with about three dozen of the company's top managers, including CEO Hassane El-Khoury.
Ploss, eager to build trust, told them that Infineon and Cypress are a “perfect fit” because their complementary products create an avenue for faster growth, benefiting employees and shareholders. Ploss will meet with investors in California and the U.S. East Coast over the coming days to repeat that message, and Infineon has dispatched a second team to London to talk to investors there.
Getting the deal over the line has added significance following the CEO's attempt to buy U.S. rival Wolfspeed from Cree Inc. The $850 million takeover was called off in 2017 after the U.S. raised national security concerns, depriving him of a growth opportunity. Infineon has since watched from the sidelines as the semiconductor industry reshaped over the past years as companies combined to gain scale while fighting rising costs and shrinking customer bases.
For Europe, the Cypress deal also carries significance. It would catapult Infineon into the top 10 of global chipmakers based on sales, creating what many of the region's politicians have long called for: A local tech champion that can compete with bigger rivals in the U.S. and Asia.
Read More: Infineon Arrives Late to Its Own $200 Billion Party
If regulators in the U.S. and China green-light his latest deal, Ploss has to show he can integrate the new company efficiently and deliver on the promised sales synergies, which investors are concerned about.
The takeover “makes a lot of sense strategically,” Wolfgang Donie, an analyst at Nord/LB, said Tuesday in a note to clients. Yet the price -- about 45% above Cypress's average market value during the past month -- is “pretty steep,” given there's no visibility when semiconductor demand may pick up again, he said.
Ploss said the price is “a lot of money,” in a call with reporters on Monday. “But it's an acceptable price from our point of view,” given the cost and sales synergies, as well as Cypress's product portfolio, which includes technology for anything from self-driving cars to Alexa-style smart speakers, he said.
To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net
To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, ;Giles Turner at gturner35@bloomberg.net, Andrew Pollack
©2019 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
