ON Semiconductor Analyst's 5 Key Takeaways from Synaptics Acquistion

ON Semiconductor Corp (NASDAQ:ON) Thursday inked a revised deal to acquire Synaptics Inc (NASDAQ:SYNA) in an all-cash deal with an enterprise value of around $5.7 billion.

The company expects to achieve $200 million in synergies within 18 months of closing, with room for upside in the longer term, according to Needham.

The ON Semiconductor Analyst: Analyst Quinn Bolton reiterated a Buy rating and price target of $116.

The ON Semiconductor Thesis: Synaptics’ portfolio of edge AI and connected compute products is complementary to ON Semiconductor’s solutions and expand the company’s TAM (target addressable market) beyond the data center, Bolton said in the note.

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"Management indicated there is little product overlap between the two companies, positioning them to bundle solutions and expand content," the analyst wrote. The deal is expected to increase ON Semiconductor’s TAM by an incremental $30 billion to $243 billion by 2030, he added.

The analyst noted five key takeaways from the deal announcement:

• The deal is expected to be earnings accretive immediately after closing, versus earlier expectations of within 18 months.
• Needham expects the transaction to add 50 cents per share to ON Semiconductor’s non-GAAP earnings in 2028.
• By restructuring the deal, the company avoided issuing shares of 57 to 58 million, since the deal has shifted from stock to all-cash.
• ON Semiconductor expects to drive incremental synergies in the longer term from cross-selling, leveraging shared distribution channels, and bringing certain Synaptics products into its EFK fab.
• Despite issuing around $2.5 billion in debt to finance the transaction, ON Semiconductor’s net leverage should remain less than 2X after deal closing.

The transaction is expected to close mid-2027 and is subject to shareholder approval and regulatory approvals, and customary closing conditions, he stated.

ON Price Action: Shares of ON Semiconductor had risen by 5.79% to $84.72 at the time of publication on Friday.

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