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Infineon Acquired Primarion in 2008: Price, Products and Earn-Out

Infineon bought Primarion in April 2008 to expand its digital power-management portfolio. The deal included $50 million in cash and a revenue-based earn-out that was not paid.
From TheFinanceBase Team2 min to read
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Infineon acquired Primarion, a fabless maker of digital power-management chips, in April 2008. The announced price was €32 million ($50 million) in cash, plus a performance-based payment of up to $30 million; Infineon later reported that no contingent payment was made because Primarion’s revenue fell short of the required level.

When did Infineon acquire Primarion?

Infineon’s contemporaneous SEC filing and quarterly report identify April 28, 2008, as the acquisition date. A later Infineon prospectus describes the transaction as closing on April 25, 2008. The filings therefore differ by three days; April 28 is the date given in the contemporaneous transaction and quarterly filings. Infineon’s 2008 filing and quarterly report use April 28, while the later prospectus gives April 25.

How much did Infineon pay?

Infineon reported cash consideration of €32 million, equivalent to $50 million, for Primarion. The agreement also included contingent performance-based consideration of up to $30 million, tied to revenue during a post-acquisition measurement period. The prospectus specifies that period as July 1, 2008, through June 30, 2009. Infineon’s 2008 filing and prospectus describe the terms.

What did Primarion make?

Primarion was a fabless semiconductor company headquartered in Torrance, California. It designed, manufactured and marketed digital power integrated circuits for computing, graphics and communications applications. Its technology combined power conversion and power management on a chip, with adaptive local control over power delivery intended to optimize performance and reduce power consumption. Infineon presented the integrated approach as a way to simplify system design and reduce cost. Infineon’s 2008 filing and prospectus describe Primarion’s products and their intended role.

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Why was Primarion important to Infineon?

The acquisition was intended to strengthen Infineon’s power-management business and broaden its digital-power portfolio. Infineon said that combining Primarion’s digitally controlled power-management devices with its own power semiconductors would help it offer more complete systems, with greater density, efficiency and control. The strategic value was therefore in pairing digital control with Infineon’s existing power-device portfolio, not simply adding another chip supplier. Infineon’s announcement quotes management on the rationale.

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Was there an earn-out, and was it paid?

Yes. The deal included up to $30 million in additional consideration tied to Primarion’s revenue after closing. Infineon’s later annual report says the revenue requirement was not met and no contingent payment was paid. The annual report also records goodwill adjustments associated with a lawsuit filed after the acquisition and a reduction in Primarion’s deferred tax asset. Infineon’s later annual report reports the payment outcome and accounting adjustments.

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