Allegro Stock Leaps 20% on Report ON Semi Could Seek to Buy It

Allegro MicroSystems (ALGM) stock surged by over 20% on Monday, March 3, following a Bloomberg News report that ON Semiconductor (ON) is exploring a potential acquisition of the company. The report, citing unnamed sources, stated that ON has been working with advisers to pursue a takeover of Allegro, which could significantly impact the competitive landscape in the automotive and industrial sectors.

The potential acquisition of Allegro by ON aligns with ON Semi's long-term growth strategy, as it would enable the company to expand its product portfolio and market reach in the automotive and industrial sectors. By acquiring Allegro, ON Semi would gain access to Allegro's extensive product portfolio, including advanced sensor integrated circuits and application-specific analog power ICs. This would allow ON Semi to offer a broader range of solutions to its customers, particularly in the growing areas of e-Mobility, ADAS safety features, and automation.

The acquisition could also lead to synergies and cost savings for ON Semi, as it integrates Allegro's operations and product portfolio. These potential synergies and cost savings could help ON Semi improve its competitive position, better weather economic downturns, or market fluctuations.

However, the acquisition may raise regulatory and antitrust concerns, as it could lead to significant horizontal overlap in the semiconductor industry, particularly in the automotive and industrial sectors. This could result in reduced competition and higher prices for consumers. Regulators may scrutinize this overlap and potentially block the deal or impose remedies to address these concerns.

The acquisition may also require regulatory approval from various authorities, such as the Committee on Foreign Investment in the United States (CFIUS) and the Federal Trade Commission (FTC). These authorities may scrutinize the deal for potential antitrust concerns and may impose conditions or block the deal if they find significant issues.

Allegro's stock price surged by over 20% on Monday, March 3, following the report. The stock was up 13% at $25.22 in premarket trading on Monday, after closing at $32.48 this time a year ago. Shares were trading at $30.22 on Tuesday, March 4, representing a 13.12% increase from the latest price.



In conclusion, the potential acquisition of Allegro by ON Semi could have significant implications for both companies and the semiconductor industry as a whole. While the acquisition could provide ON Semi with access to Allegro's advanced product portfolio and expand its market reach, it may also raise regulatory and antitrust concerns that could impact the deal's prospects. Investors should closely monitor the situation as it develops and consider the potential impact on their portfolios.