Onsemi (ON) Increases Offer for Allegro MicroSystems Amid Weak Automotive Chip Demand

🗝️ Key Points

• Onsemi (ON, Financial), a leading American chip manufacturer, is making another attempt to acquire its smaller rival, Allegro MicroSystems.
• This move comes as Onsemi seeks to navigate the prolonged downturn in automotive chip demand.
• Despite multiple rejections over the past six months, Onsemi has raised its offer to $35.10 per share in cash, up from the previous $34.50 proposed in 2024.The offer implies a.

Onsemi (ON, Financial), a leading American chip manufacturer, is making another attempt to acquire its smaller rival, Allegro MicroSystems. This move comes as Onsemi seeks to navigate the prolonged downturn in automotive chip demand. Despite multiple rejections over the past six months, Onsemi has raised its offer to $35.10 per share in cash, up from the previous $34.50 proposed in 2024.

The offer implies a total enterprise valuation for Allegro of $6.9 billion, inclusive of debt. Onsemi’s CEO, Hassane El-Khoury, emphasized that the acquisition would merge two highly complementary businesses, potentially enhancing their market positioning.

The automotive chip sector is currently experiencing weak demand, as automakers work through excess chip inventories accumulated during the COVID-19 pandemic. The uncertain macroeconomic environment has also led buyers to reduce bulk purchases. Last month, Onsemi projected its first-quarter revenue to fall short of Wall Street expectations.

Onsemi’s latest offer represents a premium of Approximately 31% over Allegro’s closing price on Wednesday. The deal would require Onsemi to assume Allegro’s debt, which stood at around $507 million as of December 27.

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