ON Semiconductor to buy Fairchild for about $2.3 billion

The offer of $20 per share represents a premium of almost 12 percent to Fairchild’s Tuesday close.

The deal will help ON Semiconductor diversify its semiconductor business, which makes chips to improve power efficiency in products ranging from home appliances to automobiles.

Chief Executive Officer, Keith Jackson said during the conference call that there is little product and revenue overlap between both the companies. The acquisition creates a leader in the power semiconductor market with combined revenue of approximately $5 billion, diversified across multiple markets with a strategic focus on automotive, industrial and smartphone end markets.

A wave of deals have been observed in the semiconductor industry this year, as companies looks to trim expenses, fulfil demand for low-priced chips and expand portfolios as Internet-linked devices gain popularity. Over $80 billion in semiconductor mergers and acquisitions has been racked up so far in 2015, according to data compiled by Thomson Reuters.

Fairchild Semiconductor Intl (NYSE:FCS) was downgraded by stock analysts at Morgan Stanley from an “overweight” rating to an “equal weight” rating in a research report issued on Wednesday, The Fly reports. It follows Intel’s (INTC) $16.7 billion purchase of Altera (ALTR) in June and Avago Technologies (AVGO) $37 billion purchase of Broadcom (BRCM) in May. The company expects to achieve annual cost savings of United States dollars 150 million within 18 months of closing the transaction.

Deutsche Bank and BofA Merrill Lynch are financial advisers to ON Semiconductor, while Morrison & Foerster the legal adviser. The Organization is engaged in power analogue and design, together with packaging.