ON Semiconductor Corp. (NASDAQ: ON) and Fairchild Semiconductor International Inc. (NASDAQ: FCS) made waves in Wednesday’s morning trading session on news of an acquisition. Both companies announced that they have entered into a definitive agreement in which ON Semiconductor will acquire Fairchild for $20.00 per share in an all-cash transaction valued at approximately $2.4 billion.

The acquisition creates a leader in the power semiconductor market with combined revenue of approximately $5 billion, diversified across multiple markets with a strategic focus on automotive, industrial and smartphone end markets.

This transaction is expected to be immediately accretive to ON Semiconductor’s earnings and free cash flow. At the same time, the company anticipates achieving annual cost savings of $150 million within 18 months after closing the transaction.

The boards of both companies have already unanimously approved this transaction, but it is still subject to shareholder and regulatory approval.

Keith Jackson, president and CEO of ON Semiconductor, said:

The combination of ON Semiconductor and Fairchild creates a power semiconductor leader with strong capabilities in a rapidly consolidating semiconductor industry. Our plan is to bring together two companies with complementary product lines to offer customers the full spectrum of high, medium and low voltage products,” “The immediate EPS accretion and potential to significantly augment ON Semiconductor’s free cash flow, make the Fairchild acquisition an excellent opportunity for ON Semiconductor stockholders.

Mark Thompson, chairman and CEO of Fairchild, added:

As part of ON Semiconductor, Fairchild will continue to pioneer technology and design innovation in efficient energy consumption to help our customers achieve success and drive value for our partners and employees around the world. We look forward to working closely with the ON Semiconductor team to ensure a smooth transition.

Shares of ON Semiconductor traded 9.9% lower to $9.67 Wednesday morning, with a consensus analyst price target of $12.98 and a 52-week trading range of $8.00 to $13.50.

But Fairchild shares were up 8.7% at $19.44. The consensus price target is $17.06, and the 52-week range is $12.22 to $20.84.

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