Shares of the U.S.-based Allegro MicroSystems (ALGM) plunged sharply after rival On Semiconductor or Onsemi (ON) walked away from a $6.9 billion acquisition offer. Following the announcement, ALGM stock declined by nearly 12% in after-hours trading, while ON stock gained 1.35% in after-hours trading.
Onsemi Ends Months-Long Pursuit of Allegro
Onsemi CEO Hassane El-Khoury stated that the company withdrew its acquisition offer due to the Allegro Board’s unwillingness to fully engage or consider the proposal. The decision ends Onsemi’s months-long pursuit of Allegro, which aimed to capitalize on a market downturn to expand its presence in the automotive sector.
In March, Onsemi disclosed a $35.10 per share bid for Allegro MicroSystems, following an earlier $34.50 offer that Allegro had rejected. The $6.9 billion proposal was ultimately declined as well. According to market reports, Onsemi had spent several months with advisers before making its formal offer.
Onsemi Loses Opportunity to Expand Market Footprint
Onsemi and Allegro are semiconductor companies focused on delivering power and sensor technologies for the automotive and industrial sectors.
The acquisition of Allegro would have bolstered Onsemi’s presence in the power management market for electric and conventional vehicles. It also would have expanded the company’s role in providing critical chips for advanced braking and steering systems.
Having said that, Onsemi now plans to shift its focus to other existing opportunities to enhance its shareholder value. The company intends to continue allocating capital to its ongoing share repurchase program.
Is ON Semiconductor Stock a Good Buy?
Overall, Wall Street has a Moderate Buy rating on ON stock, based on 15 Buys, eight Holds, and one Sell assigned in the last three months. The average ON Semiconductor share price target is $58.23, which implies a 64% upside from the current levels.
Year-to-date, ON stock has declined by over 40%.
