Vishay Buying Rival General SemiconductorVishay Buying Rival General Semiconductor

Passive-electronic-components maker Vishay Intertechnology Inc. is buying rival General Semiconductor Inc. in a deal valued at $538.9 million and is assuming $229.4 million in debt. Vishay also announced second-quarter earnings of $3.1 million, a 37% drop from year-ago earnings of $131 million. Revenue for the period, ended June 30, was $383 million, compared with revenue of $612 million a year ago.

Once the acquisition clears regulatory and shareholder hurdles, Vishay and General Semi expect to save a combined total of $50 million annually by eliminating duplicate operations, says Robert Freece, a senior VP with Vishay. General Semi would add diodes, power mosfets, and rectifiers to Vishay's product set.

Many companies in the passive-electronic-components industry are consolidating to expand their arsenal of products and sales forces and to try to be as close to their customers as possible, literally, says analyst Tom Smith with Standard and Poor Equity Group. The acquisition gives Vishay better scalability and allows it to go after OEM customers who want to one-stop shop, Smith says. He adds that discrete semiconductors, which Vishay gets from General Semi, is a more profitable product line and new revenue.

Smith is optimistic that Vishay will turn around as the economy bottoms out. "They may be able to tiptoe through the sharp downturn, showing positive earnings," Smith says. He's forecasting Vishay's stock to outperform the broader market over the next six to 12 months.