Infineon Technologies AG — M&A Activity 2014

Aug 21, 2014

Infineon to Acquire International Rectifier

Investor and Analyst Presentation 21 August 2014

Investor Relations

Key Facts

Strategic Rationale

Financial Rationale

Summary

Disclaimer:

This presentation contains forward-looking statements about the business, financial condition and earnings performance of the Infineon Group.

These statements are based on assumptions and projections resting upon currently available information and present estimates. They are subject to a multitude of uncertainties and risks. Actual business development may therefore differ materially from what has been expected.

Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements.

Infineon to Acquire International Rectifier

Key facts of the deal

• Fully diluted equity consideration: net cash as per 30 June 2014:

• Fully diluted enterprise value: ~\$2.4bn (€1.8bn)

• Premium over closing share price as per 19 August 2014: 50.6% (over \$26.57)

• Premium over average closing share price of last three months:

Purchase price: \$40 per IRF share in cash

~\$3.0bn (€2.3bn)

~\$0.6bn (€0.45bn)

Signing date: 20 August 2014

Expecting closing date: late CY 2014 / early CY 2015

47.7% (over \$27.07)

Key Facts

Strategic Rationale

Financial Rationale

Summary

Strategic Motivation: Perfect Skill Match

Topic	Infineon Technologies Strength	International Rectifier Strength
IGBT modules	high-power	low-power (IPM, µIPM™)
IGBTs	high-voltage IGBTs	low-voltage IGBTs, drivers, control ICs
MOSFETs	high-voltage	low-voltage
digital power management	server	datacom
wide-bandgap materials	SiC	GaN
home region	EU	US
channel	key accounts	distribution

Infineon + International Rectifier: Multiple Strategic Benefits

Adding to scope Adding to scale

• Rounding-out the product portfolio

• Increasing breadth and depth of application understanding

• Broader market access

• Selling breadth
• Operations synergies
• Exploiting overhead synergies

• Capability to drive R&D

• GaN product and IP portfolio

• Multi-chip packages and IPMs/µIPM™s
• HiRel capability

Adding technology Adding market presence

• Improved regional footprint in particular the US and APAC
• Increased presence in distribution channel

IFX + IRF: Gaining IGBT Low-Power Modules, Drivers and Control ICs

Expanding the IGBT driver, module and application portfolio

• Broad IGBT driver portfolio for
• high-voltage applications
• low-power drives (< 250 W)
• IPMs (Intelligent Power Modules) and µIPM™s
• Strong industrial drive expertise
• integrated power design platform (iMotion)
• high-voltage IC technology

IFX + IRF: Example: IPM Portfolio

Infineon	International Rectifier
Access to standard product  portfolio of IPMs via LSPS	Strong product portfolio of  µIPM™s used in low-power drives
 Strong in home appliances (e.g. aircons, washing machines)	Strong in industrial  applications
 Geographical presence mainly in Korea	 Geographical presence mainly in China, the US and Europe
Benefits
 Combination of IFX and IRF is complementary in applications and product portfolio.

Combination of IFX and IRF leads to improved customer and regional coverage.

IFX + IRF: Enhanced Power MOSFET and Digital Power Management IC Portfolio

Creating a leader in efficient power conversion and power density

Low-voltage and medium-voltage MOSFETs

(computing, SMPS, low-voltage drives)

Digital power control

DC/DC application expertise

• Broad package portfolio incl. automotive-qualified and multi-chip packages
• Enhanced regional and channel coverage: strong tier-2 and tier-3 customer relationships particularly in USA, China and Japan

IFX + IRF: DC/DC System Leadership; Diversification into Appl. Beyond Server

• Strong application know-how in server DC/DC computing
• Strong silicon MOSFET technology and best-in-class products
• Strong digital multi-phase controller portfolio for server application
• Strong presence at tier-1 customers

Infineon International Rectifier

• Strong application know-how in datacom DC/DC and PoL* DC/DC
• Broad portfolio of analog and digital controllers and integrated products for PoL* , gaming, highend PCs and datacom
• Wide range of MOSFET/package combinations
• Strong presence at tier-2/-3 customers with special focus on USA, Asia and Japan

* PoL = Point-of-Load

Benefits

Complementary portfolio with International Rectifier contributing strengths in single-phase control and multi-chip packaging, non-server applications and channel focus on tier-2 and tier-3-customers in US, Asia and Japan.

: Strengthening Our Leading Position in a Fragmented Power Semiconductor Market

Source: IHS, "Power Semiconductor Discretes and Modules – World – 2013", December 2013.

: Accelerated Ramp of Infineon's Leading 300mm Thin Wafer Manufacturing

Benefits for Infineon's 300mm ramp

Certain products of International Rectifier's low-voltage MOSFETs and IGBTs can be transferred to Infineon's 300mm cluster

Larger revenue base will also increase the loading of 300mm in the future

Increased volume in 300mm will accelerate ramp and consequently should bring forward cost target milestones.

: Strengthening of Infineon's Position in Compound Power Semiconductors

Key facts

• Significant strengthening of Infineon's GaN1) technology position:
• GaN-on-Si epitaxy
• Normally-on GaN HEMT2): 100 V in production, 600 V sampling
• Strong IP portfolio
• Full GaN portfolio with controllers, drivers, switches and multi-chip packages together with Infineon's SiC3) expertise creates clear leader in power semiconductors based on wide-bandgap materials

150mm GaN Wafer

Leading to novel power system architectures

1) GaN = Gallium Nitride. 2) HEMT = High-Electron-Mobility Transistor. 3) SiC = Silicon Carbide.

: Capabilities of the HiRel Business

Key facts about HiRel (high-reliability)

Large extension of existing small but stable and profitable Infineon HiRel business; focus on commercial aviation, space, satellites and high-temperature applications

Significant cross-selling opportunities for Infineon products, e.g. CoolMOS™, RF power, RF switches and diodes

: Further Improve Balance of Geographical Footprint

Benefit

• Significant increase in R&D and selling resources in the US greatly increases proximity to key customers and innovation leaders
• Adding to critical mass in APAC including China and in Japan

Source: Infineon and International Rectifier annual reports.

* Infineon revenue last 12 months (July 2013 through June 2014).

** International Rectifier FY 2014 revenue of \$1,107m (without royalties), assuming exchange rate of \$1.34/€1.00.

: Increased Presence and Stronger Relationship Within the Distribution Channel

Much broader product portfolio leads to one-stop shop for distribution partners and for end customers.

Source: Infineon and International Rectifier annual reports.

• * Infineon revenue last 12 months (July 2013 through June 2014).
• ** International Rectifier FY 2014 revenue of \$1,107m (without royalties), assuming exchange rate of \$1.34/€1.00.

Key Facts

Strategic Rationale

Financial Rationale

Summary

Transaction Complies with Infineon's Strategy of Sustainable Profitable Growth

Accretive to 15% Segment Result target margin at the latest in FY17

Realize significant synergies from higher purchasing volumes, optimized manufacturing footprint and OpEx functions

Intern. Rectifier margin contribution to be at least in line with Infineon 15% Segment Result margin target at the latest in 2nd full year post closing (FY17)

Average-cycle 15% Segment Result margin target maintained

Solid Balance Sheet Even After Cash-/Debt-Financed Transaction

Solid balance sheet pro-forma for transaction

Key Facts

Strategic Rationale

Financial Rationale

Summary

Summary

• Infineon to acquire International Rectifier for \$40 per share
• Fully diluted equity consideration ~\$3.0bn; enterprise value ~\$2.4bn
• IRF reinforces IFX's strategy and complements IFX's strengths
• Complementary product portfolio and regional footprint, SiC and GaN for wide-bandgap leadership, scale economies particularly in 300mm
• Financed with €1.5bn of new debt and €800m of cash on hand
• Solid pro-forma balance sheet maintained: 1.4x gross debt/EBITDA, 38% gross cash/sales, €0.3bn of net cash
• Transaction accretive to adjusted* pro-forma EPS already in FY 2015
• FY 2014 dividend maintained at €0.16 €0.18, payable in 2015

* For definition please see page 18.

• Strong synergies: International Rectifier to deliver margins at least in line with Infineon target at the latest in second year post closing
• Infineon Segment Result margin target maintained at 15%

International Rectifier: 13% Growth in FY 2014 with Strong Margin Expansion

Well Diversified Addressed Markets Integrate Well With Infineon

International Rectifier business units
Power Management Devices (PMD)	Energy Saving Products (ESP)	Enterprise Power (EP)	Automotive Products (AP)	High-Reliability (HiRel)
Power supply  Data processing  Telecoms  Industrial and  commercial battery-powered systems	Motor control  appliances Industrial  automation Lighting and  display Audio and video 	Servers  Storage  Routers  Switches  Infrastructure  equipment Notebooks  Graphic cards  Gaming consoles 	Automobiles  Trucks & Buses  Hybrids  Electric vehicles 	Satellites  Space exploration  vehicles Commercial  aircraft High reliability  devices in heavy industry and biomedical Defense systems 

Related Infineon Divisions

PMM PMM & IPC PMM ATV PMM

International Rectifier: Global Presence, Blue Chip Customer Base