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Infineon intends to raise US$1b

Struggling German chip maker Infineon, working to ease its financing needs, plans to raise 725 million euros (US$1 billion) in a capital increase with the backing of United States investor Apollo.

Infineon plans to launch a rights issue of up to 337 million shares with a subscription price of 2.15 euros, the company said in a statement yesterday.

US activist investor Apollo Management LP agreed to buy all shares in the rights issue that are not taken by existing shareholders.

Apollo could end up owning a stake of up to 29 percent, just under the threshold of 30 percent that by German law would force it to make a takeover offer for the entire company.

Infineon, which has been buffeted by a slump in global chip prices, said it would use the proceeds to repay debt and strengthen its liquidity.

Significant stake

Commerzbank analyst Thomas Becker said recent positive news flow from Infineon had paved the way for a capital increase and a buy-in by Apollo but the size was a surprise.

"We calculated a financial gap of 100 million euros to 400 million euros," Becker said in a research note.

"We believe that Apollo has pushed hard to grab a significant stake and that Infineon was keen on getting a new strategic shareholder on board."

However, Becker said Apollo's agenda was unclear but that the US investment firm "will do the utmost to remove Infineon's valuation discount of 50 percent to market multiples," possibly leading to a sale of Infineon's wireless unit or "to complete asset stripping."

Infineon is Europe's biggest automotive chip supplier and competes with privately owned Dutch NXP as well as Texas Instruments and STMicroelectronics.

Infineon plans to use proceeds from the rights issue to repay convertible bonds maturing in June 2010, of which a nominal amount of 522 million euros is outstanding, and to repay exchangeable bonds maturing in August 2010, of which a nominal amount of 48 million euros is outstanding.

Infineon, which posted a net loss from continuing operations of 258 million euros in its second quarter, has pledged to come up with a refinancing plan by the summer.



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