Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Divestitures

Note 5: Acquisitions and Divestitures

The Company pursues acquisitions and divestitures from time to time to leverage its existing capabilities and further expand its business to achieve certain strategic goals. Acquisition costs are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. During the year ended December 31, 2023, the Company incurred insignificant costs related to acquisitions and divestitures. During the years ended December 31, 2022 and 2021, the Company incurred acquisition and divestiture related costs of approximately of $12.9 million and $11.9 million, respectively, which are included in operating expenses in the Consolidated Statements of Operations and Comprehensive Income.

2022 Acquisition and Divestitures

EFK Acquisition

On December 31, 2022, the Company completed the acquisition of the East Fishkill, New York site and fabrication ("EFK") facility and certain other assets and liabilities from GLOBALFOUNDRIES U.S. Inc. ("GFUS"), previously announced in April 2019, for total consideration of $406.3 million, which was accounted for as a business combination. The Company paid GFUS $100.0 million and $70.0 million during 2020 and 2019, respectively, and the remaining consideration of $236.3 million was paid on January 3, 2023. Separately, the Company paid GFUS a one-time license fee of $30.0 million in cash for certain technology during 2019, which has been recognized as an intangible asset subject to amortization.

The Company also entered into an ancillary agreement, as amended, relating to the provision of foundry services entered into in connection with the execution of the acquisition agreement, which provided the Company certain additional tools and flexibility in its capital expenditures and manufacturing plans for 2021 and 2022.

During the year ended December 31, 2023, the Company finalized its determination relating to the fair value of assets acquired and liabilities assumed from the EFK acquisition, which was completed on December 31, 2022. The final allocation of the purchase price of EFK to the assets acquired and liabilities assumed based on their relative fair values, which is materially consistent with the preliminary allocation is as follows (in millions):

	Purchase Price Allocation
Inventory	$	3.3
Other current assets	4.4
Property, plant and equipment	396.5
Other non-current assets	11.4
Total assets acquired	415.6
Current liabilities	3.0
Other long-term liabilities	6.3
Total liabilities assumed	9.3
Net assets acquired/purchase price	$	406.3

Unaudited pro-forma consolidated results of operations are not included considering the significance of the acquisition to the results of the Company.

Divestitures

During 2022, the Company divested four wafer manufacturing facilities to various parties:

•The Oudenaarde, Belgium manufacturing facility was divested to BelGaN Group BV for an aggregate consideration of approximately $19.9 million;

•The South Portland, Maine, manufacturing facility was divested to Diodes Incorporated for an aggregate consideration of approximately $80.0 million;

•The Pocatello, Idaho manufacturing facility was divested to LA Semiconductor for an aggregate consideration of approximately $80.0 million; and

•The Niigata, Japan manufacturing facility was divested to JS Foundry K.K., a Japan-based foundry company, for aggregate consideration of approximately $90.3 million.

These divestiture transactions resulted in a net gain on divestiture of $67.0 million in 2022.

2021 Acquisition and Divestiture

GT Advanced Technologies, Inc. ("GTAT") Acquisition

On October 28, 2021, the Company acquired all of outstanding equity interests of GTAT. The Company believes the acquisition of GTAT will act as a building block to fuel growth and accelerate innovation in disruptive intelligent power technologies and secure supply of SiC to meet growing customer demand for SiC-based solutions in the sustainable ecosystem.

Pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger, the purchase price totaled $434.9 million. Cash consideration amounted to $424.6 million, of which $17.0 million was deposited for general representation and warranty purposes in an escrow account, legally owned by the Company. All 17.0 million was released to the seller in accordance with the escrow agreements during the years ended December 31, 2023 and 2022. The remaining consideration of approximately $10.0 million represented the value of certain pre-acquisition deposits and payable balances effectively settled between the parties since the Company was GTAT's customer. From the closing date of the acquisition through December 31, 2021, the Company recognized immaterial revenue and net loss relating to GTAT .

The allocation of the purchase price of GTAT to the assets acquired and liabilities assumed based on their relative fair values is as follows (in millions):

	Purchase Price Allocation
Cash and cash equivalents	$	8.2
Inventory and other current assets	10.0
Property, plant and equipment	31.9
Goodwill	274.8
Intangible assets - Developed Technology	130.0
Deferred tax assets	13.4
Other non-current assets	7.4
Total assets acquired	475.7
Current liabilities	5.8
Other long-term liabilities	35.0
Total liabilities assumed	40.8
Net assets acquired/purchase price	$	434.9

Developed technology of $130.0 million, determined using the income approach is estimated to have a useful life of 13 years. There were no IPRD intangible assets identified. The acquisition produced $274.8 million of goodwill, which has been assigned to a reporting unit within PSG. Goodwill is attributable to the expected value generation by GTAT by being part of the Company along with a more meaningful engagement by the customers due to the scale of the combined entities, GTAT's assembled workforce and other product and operating synergies. Goodwill arising from the GTAT acquisition is not deductible for tax purposes.

GTAT Pro-Forma Results of Operations

Unaudited pro-forma consolidated results of operations for the years ended December 31, 2023 and 2022 is not required because the results of the acquired business are included in the Company's results. The following unaudited pro-forma

consolidated results of operations for the year ended December 31, 2021 has been prepared as if the acquisition of GTAT had occurred on January 1, 2021 and includes adjustments for the effect of fair value changes, transaction costs, taxation and financial structure (in millions):

	Year Ended December 31,
	2021
Revenue	$	6,750.4
Net income	972.4
Net income attributable to ON Semiconductor Corporation	970.8

Divestiture

On October 1, 2021, the Company divested itself of one of its businesses along with the related intellectual property for aggregate consideration of approximately $13.6 million and recognized a gain of $10.2 million after offsetting the carrying values of the disposed assets and liabilities.