Onsemi "ON Buying SYNA - Nice Deal But Not A Needle Mover" (Neutral) Arcuri

Research evidence excerpt

Onsemi "ON Buying SYNA - Nice Deal But Not A Needle Mover" (Neutral) Arcuri

be able to

Q1 0.64 0.64

surround SYNA’s compute (MCU/MPU), connectivity and touch interface solutions to

Q2E 0.73 0.71

offer intelligent solutions for physical AI including key markets like robotics and

Q3E 0.85 0.83

humanoids and its systems expertise can help customers that are focused on the data/ Q4E 0.90 0.92

ML side of physical AI. Finally, the stock structure allows ON to maintain its capital return 12/26E 3.12 3.10

discipline and pay a lower premium. 12/27E 4.30 4.31

12/28E 5.81 5.90

Pro Forma Merger Model

Timothy Arcuri

Financially, our pro-forma analysis suggests it could be marginally accretive to our C2029

Analyst

ON EPS estimate (but more accretive to Street's estimates) excluding revenue synergies. timothy.arcuri@ubs.com

We believe guidance for ~$200MM in expense synergies is achievable as it is primarily +1-415-352 5676

(85-90%) within SG&A, while the remainder in COGS. SYNA notably excludes SBC in its

Alex Kivali

Non-GAAP disclosures (~10% of revenue), which ON will include in its pro-forma Analyst

operating profit. We note that compared to precedent transactions (Figure 3PrecedentTransactions), this is a alex.kivali@ubs.com

slightly above average deal length while synergies at 3% of combined cost base is below +1-212-713 3945

average. Finally, the $7B all stock transaction implies a 16x EBITDA multiple, in line with

Aaryan Wadhwa

precedent transactions. Associate Analyst

aaryan.wadhwa@ubs.com

Valuation: +1-212-821 6481

Highlights (US$m) 12/23 12/24 12/25 12/26E 12/27E 12/28E 12/29E 12/30E

Revenues 8,253 7,082 5,995 6,480 7,425 8,396 9,330 10,224

EBIT (UBS) 2,665 1,974 1,120 1,412 1,974 2,605 3,225 3,873

Net earnings (UBS) 2,258 1,705 966 1,224 1,695 2,246 2,752 3,299