Fairchild Semi: The saga continues . . . believe ON may raise its offer
FBR Capital notes FCS received a revised bid from its Chinese suitor "Party G Group." Firm has steadily believed that there were numerous paths to a higher bid for shareholders. While the Chinese suitor's original $21.70 cash offer remains unchanged, new terms have sweetened the deal. First, "Party G Group" offers to reimburse Fairchild for the ~$70 mln termination fee with ON Semi. Secondly, Chinese "Party G Group" would absorb the regulatory risk, shouldering a reverse termination fee to co of $108 mln if the deal were to fail CFIUS. While many details may yet to be revealed, on the surface, firm believes the elimination of the ON termination fee and the transfer of potential regulatory liability limits downside and makes the $21.70 offer superior. With another step in the right direction, firm is once again at Outperform on co, as they believe there is a meaningful probability that ON will raise its bid to $22 and perhaps higher. (They can rationalize $24.)