nfineon to sell $1 billion of discounted shares
6:17a ET July 10, 2009 (MarketWatch)
LONDON (MarketWatch) -- Infineon Technologies AG, Europe's second-largest chip company, on Friday announced a discounted sale of stock, its second move this week to ease balance-sheet concerns.
The issue of up to 337 million shares at a subscription price of 2.15 euros should raise 725 million euros ($1 billion) if fully placed, Infineon said.
Selling discounted shares to existing holders, which also known as a rights issue, is a popular way of raising money in Europe.
Infineon intends to use the proceeds to repay debt and strengthen its liquidity position. In particular, it plans to repay its convertible bonds maturing in June 2010, of which a nominal amount of 522 million euros is outstanding.
"The intended capital increase represents an important part of Infineon's comprehensive refinancing plan. It should make a significant contribution to increase the economic value and sustainability of Infineon for the benefit of both the employees and the stakeholders," Chief Executive Peter Bauer said in a statement.
Infineon shares rose 1.7% to 2.63 euros in Frankfurt.
The refinancing move comes less than a week after the company agreed to sell its Wireline Communications business to an affiliate of U.S.-based investor Golden Gate Capital for 250 million euros, sending its shares soaring. See full story.
Under the terms of the rights issue, Infineon said each existing shareholder will be allowed to buy four discounted shares for every nine held.
Apollo Global Management will backstop the offer so long as they acquire at least a 15% stake, in which case they will name the chairman as well as a second board member. Their maximum shareholding will be 30% minus one share.
Apollo is an alternative asset manager that acts as a long-term strategic investor.
Infineon said its investment "would signify a clear mark of confidence in the management, work force and product portfolio of Infineon."
At Metzler Equities, analyst Eerik Budarz, said he had mixed feelings about the news.
"On one hand financing now seems much more secured than before. On the other hand the stock is going to be diluted by the move," he said.
Regarding Apollo's involvement, he said that the group, which will have a high interest in the company becoming profitable, "might give an extra impetus to things," in particular if they can get one or two of their people on the board.
He also said he expects some investors may start pushing for the sale of the wireless business.
At Commerzbank, Thomas Becker agreed that Apollo's involvement may lead to the sale of that business.
"The U.S. private-equity firm is well known for leveraged and distressed buyouts and debt investments. We believe that Apollo will do its utmost to remove Infineon's valuation discount (50% to market multiples). This could lead to a sale of the wireless business resulting in an extra dividend, or, on a more negative note, to complete asset stripping," he wrote in a note to clients.
