M&A Announcement

Jun 3, 2019

Thank you, operator, and good morning, everyone. Welcome to this short notice conference call, where we have exciting news to share on this early Monday morning. Infineon has just signed a definitive agreement to acquire Cyprus Semiconductor Corp. We want to provide you the key parameters of the transaction and talk about its strategic and financial rationale. Here, together with me in Munich, is the entire Infineon Management Board, our CEO, Reinhard Closs, as well as Sven Schneider, CFO Johan Hanebeck, COO and Helmut Gassel, CMO. Reiner and Swen will start with introductory remarks. We will then open the call to your questions. In addition, we have posted a slide deck about the deal on our Investor Relations webpage. Reinhard, please go ahead. Thank you, Alexander. In our announcement shortly ago, we call the acquisition of Saipressa Landmarkstep in Infineon's strategic development. And indeed, it will be a transformal deal, accelerating and strengthening our path of profitable growth laid out previously. But let me begin with the transaction highlights. We have signed an agreement to purchase all outstanding shares of Cyprus at USD 23.85 per share in cash. Taken together with the company's net debt, this corresponds to a fully diluted enterprise value of 1,000,000,000. The Executive Port of Cyprus fully supports the transaction and will recommend its approval to its shareholders. The acquisition is subject to antitrust and regulatory approvals. We expect closing occur towards the end of this or early next calendar year. The essence of this deal is about strengthening the link between the real entity world. Infineon and Cyprus have highly complementary strengths upon bringing them together, The combined entity will have a complete and highly competitive product portfolio to address high growth markets in automotive industrial and IoT application. Infineon has embarked years ago on a journey to become a provider of system solution. We call this initiative P2S or product to system. At our Capital Markets Day in London last year, we elaborated first on our strategy, well positioned in markets with structural drivers, We leverage our strong core by expanding into adjacent and new technologies, applications and markets and deliver sustainable profitable growth. Cypress is ideally suited to enhance and accelerate this strategy. With its leading suite of microcontrollers and connectivity components as well as its software development ecosystem it will broaden our scope significantly. Combined with our world class power components, sensors, RF and security know how, we will be able to offer highly differentiated system solutions. As you know, Infineon follows a highly disciplined approach to mergers and acquisitions and always looks at transactions from three angles: strategic fit, financial fit and cultural fit, acquiring Cyprus perfectly fits the bill on all three criteria, The deal rationale is very compelling. Generally speaking, there is a massive shift in devices are being turned into useful application, be it in industrial, be it in consumer markets. The real and the digital verticals are getting steadily more integrated and connected. So far, we are seeing predominantly stand alone, unconnected devices, which are optimized to fulfill their specific purpose. Functionality is limited power is coming mainly from the power line and connectivity if exist is mostly wired. Examples are production machinery and factory, household appliances or power tools. This is now changing at rapid speed. In numerous application field, devices are becoming smart and connected, enabling new and improved functionalities. System thinking comes to the foreground, linking together devices by means of secure connectivity, both wireless as well wired. At the same time, more and more of such devices In this world, smart and connected devices were number tens of billions. And It is this future world that the combined portfolio of Infineon and Cyprus will address. Taking on Cypress leading microcontrollers, software ecosystem and connectivity solutions we will be in an ideal position to With this, we will benefit even more than today from structural drivers in a wide range of high growth markets. While at the same time making our business model more resilient. Let me illustrate this point by an example. Inverterizing large home appliances, such as air cons, is making them more energy efficient and Infineon is already capturing a good part Heading microcontrollers, like from Cypress T SOX family, will supplement this core end together connectivity components for wifi or Bluetooth enabled further functionality such as remote control, more intuitive user interfaces percent bill of material increase in a market that is growing at a level of 19% over the next couple of years. Further examples for similar structural growth are motor controls for server drives or battery power tools. In our automotive stronghold, we, as Infineon, are already harvesting the benefits of system expertise and of the ability to to the strengths and fortify our core even further, rounding out our portfolio of automotive microcontrollers. This is another example of the high complementary of both companies, whereas the Oryx from Infineon is geared towards key car domains like powertrain, Chassis and ADAS, with high demands and complexity and compute power, the Traveo from Cyprus is built around body and convenience as well as the instrument cluster and infotainment. Taken together, we achieved full coverage of all applications field and can address the new electronic architecture of vehicles. But it doesn't stop there as Cyprus will bring 2 more new strengths to us expanding our offering. This components for in car Wi Fi and a leading USB C franchise we will be able to offer solutions for the connected car of tomorrow. Furthermore, Cyprus has a strong offering of specialized high density nor flash for automotive application. These parts are used as instant on program flash for processors in the field of infotainment and automated driving, 2 key areas driving increasing Semiconductor content per car. Besides ADAS, the electrification of the drivetrain, the other secular growth driver in automotive, and here, Infineon already today is market leader. The combination with Cyprus will create the new overall number 1 automotive Semiconductor supplier, the 2018 pro form a global market share of 13%. We are very keen to shape the future of mobility from the pole position. Let me briefly comment on Memory Products. After contributing its NAND business as a minority partner into a joint venture with Aceke Hynix at the beginning of April, site is now offering a highly differentiated portfolio. Beside the mentioned NOR Flash Components components, It contains nonvolatile FRAM and Specialty TSRAM chips. These offer high margins and generate stable cash flows based on the leading position Cyprus has in its addressed market segments. With the acquisition, the new and large portfolio of Infineon will also become more balanced. The share of sales from embedded control and connectivity will increase by almost 10 percentage points to constitute a bit over a quarter of the combined revenue base. More complete Semiconductor solutions and ICs will be a higher part of geographic footprint and sales channels are additional aspects of the perfect strategic fit of the 2 companies. With Cyprus, Infineon increases its exposure to important regions, in particular, gaining presence as well as market share in the strategically important Japanese market. Furthermore, We will reinforce the distribution business, which will become equal in size to the business with direct customers. This plus Cyprus Advanced Digital Marketing capabilities will enable to reach far more customers in a cost effective manner. By gaining scope and broadening the product range, are the driving forces motivating the transition We also gained in considerable scale and are building a much stronger company. Based on a pro form a combined revenues of 1,000,000,000 in our fiscal year 2018, Infineon will become the number 8 chip manufacturer in the world. In addition to our leading position in powersemiconductors and security controllers and the new number 1 spot in Automotive semi already referred to, developed become the number 4 supplier of 32 bit microcontrollers. Both press as well as size matter to offer more comprehensive system solution and thus creates superior value for our customer and shareholder. By when we'll talk, we'll walk you through the different levers for strengthening the financial base of the new Infineon, let me explain what the sources of our higher revenue dynamic will be. Already in the near term, the combined company will benefit from improved access to a larger customer base. Combining our strengths will offer highly attractive cross selling opportunities. We will be able to increase our bill of materials here core application and to achieve more design wins by adding power, sensor and security components to microcontroller and connectivity sockets and vice versa. Many of today's and tomorrow's smart low power connected devices are designed and built around control and connectivity functions. This is where we will now get stronger. In the long in the long term, by joining forces, we will be able to enhance our system offering and bring new more complex solution to the market faster. Here, Cyprus software competence will bring crucial advantages improving the interoperability of products and yielding ready to use reference designs We are, therefore, very confident about our ability to outgrow our target markets. Apart from the strong strategic rationale, This acquisition is built on a very high cultural fit. This is a key prerequisite for fast and smooth integration and therefore reaping the benefits of the combination. Actually, our companies are already in close cooperation since the beginning of 2018 in the area of brushless TZ motor control where Infineon integrates a Cyprus wireless combo chipset and an Infineon I motion controller on the reference board. Together, we will continue to share to innovation and focused R And D to accelerate technology advancements. Cyprus Silicon Valley Spirit will complement Infineon's strong engineering and manufacturing culture. This bodes well for a swift and successful combination. With this, I would like to hand over to Sven who will elaborate more on the financial aspects of the proposed deal Thank you, Rainette, and good morning to everyone from my side as well. I certainly can't say that my 1st few weeks at Infineon were boring. At the same time, I'm very excited to take part in such a unique value creation opportunity. As such opportunities are skies, Cyprus comes at a price, no doubt. But in addition to the excellent strategic and cultural fit, highlighted by Reinhard, the acquisition is highly attractive also from a financial perspective. With its strong margin profile and efficient capital deployment, Cyprus will bolster our financial strength and improve our profitability. We have done a due diligence exercise and validated combining the 2 companies will bring economies of scale, allowing us to reap efficiency gains. We see savings potentials in the joint procurement of materials and manufacturing services and avoiding overlaps in R&D roadmaps and covering customer accounts more efficiently and in streamlining corporate functions. These measures will add up to annual cost savings of around 1,000,000 or around 9% of the current revenue base of Cyprus by the end of our fiscal year 20 22. We will focus on gaining these benefits in a faster decisive manner following the tried and tested integration procedures applied after the acquisition of International Rectifier. Cost synergies will constitute immediate intangible benefits However, financial value creation will by far not be limited to them. Given the many aspects of complementarity in terms of product portfolio, footprint and competencies, the transaction will yield very meaningful revenue synergies in the mid and long term. Reynard already elaborated on their sources. We estimate the additional revenue potential to be almost 1,000,000,000 by 2025 and to exceed 1,000,000,000 per annum towards the end of the 2020s, making Infineon an even more dynamic grower than today. Cyprus will be immediately accretive to our gross margin and allow us to significantly grow our synergies. With synergies ramping up quickly and growth accelerating, we will monetize benefits for our shareholders rapidly. We expect the transaction to have a positive impact on adjusted EPS already in the first full year of are closing, allowing for the equity portion of the intended company will also have a lower capital intensity given that Cyprus product portfolio permits a manufacturing setup with a substantially higher outsourcing share. Mixing this with Infineon's large scale power semiconductor fab footprint brings the index to sales ratio down by a couple of percentage points and results in a higher free cash flow, which on a pro form a combined basis was around 10% of improved margins and lower capital intensity will come together to deliver returns, which by far exceed our estimated cost of capital. Let me now comment on how we will finance and refinance the acquisition. Firstly the funding for This will be followed by a general syndication The key objective for us is to remain an investment grade company in order to continue to have access to a broad range of financial markets. Since we are committed to this, about 30 percent of the refinancing will come from equity sources, the remainder from new debt and available cash. We, by the way, expect Standard And Poor's to publish their assessment of the transaction and its financing concept later this morning. Due to the transformative nature of the transaction we will temporarily deviate from our previously communicated leverage target of no more than 2 EBITDA turns of gross debt. However, the improved cash generation capability of the combined entity will allow us to deliver quickly and we expect to be back within our debt boundary towards the end of 2022. Our second capital structure target, which calls for gross liquidity to be at a level of at least 1,000,000,000 10% of sales will remain unchanged. The same applies to our dividend policy. As you can see, acquiring Cyprus's will bring numerous benefits to Infineon's financial profile, and Reinhard will now pick up on this. Thank you, Sven. The intended acquisition firmly delivers on Infineon's strategic direction, and we pursue very clear targets with it. The addition of Cyprus will fortify our competitive position, strengthen our focus on structural growth drivers and accelerate our path of profitable growth. Broader scope and increased scale will result in a more ambitious target operating model. Upon successful integration, our through cycle financial objectives will be revenue growth of 9% plus with a segment result margin level of 19%, and an investment to sales ratio of 13%. Let me summarize acquiring Cyprus offers a unique opportunity to grasp the world leadership position in automotive, industrial and IoT semiconductor and solutions. Various application in these fields are at the tipping point to becoming smarter and more connected. We will be able to bringing together power, sensor, microcontrollers, software, connectivity and security. As a result, the new Infineon will have an even more attractive and robust business and financial model. Now Let me open the Our question and answer session will be conducted electronically on your telephone. If you are joining us today using a speaker phone, please ensure that your mute function is turned off you. And we will take our first question from David Mulholland from UBS. Please go ahead. Hi, thanks guys. Just a few questions. Firstly, on the overlap Can you possibly let us know just it's clear there's quite a lot of end market overlap, but and it doesn't look like there's too much actual direct product overlap but in areas where there is maybe direct competition between yourselves and Cyprus, can you possibly quantify how much that might be for revenues? Because Obviously, you're talking a lot about revenue synergies, but just like to understand what the synergy risks there might be for revenues. And then secondly, just on the revenue synergy targets, you said you've done good due diligence around that, but can you just help us to understand what gives you kind of the real confidence that the size is big you've explained quite well where you see it coming from, but just exactly what things you've done to be able to really put a number on that, just so we can try and give us a bit more confidence in that? David, thank you for your question. First of all, the overlap, I would say the overlap is definitely minimal. We have ourselves, basically no microcontrollers in the area of industry, we have only a very low performance set and there, I think we do not have a real relevant overlap. Automotive we have not focused on the portfolios, which Cyprus is having connectivity we don't have in that area. So basically, it is a low, even a very low single digit percentage where we have a certain overlap. The revenue synergies here it is very clear. We did not thought about Cyprus overnight. We have, for a very long term, thought about how we develop our strategy further and rethinking back to our Capital Markets Day, we already addressed that we want to complement ourselves in the areas of focus applications by a product portfolio, which complement sensors and powers. Therefore, this has been an active search and we check the various opportunities, where we could add these elements. Therefore, the base for judging on the synergies comes from a detailed analysis of the applications where we are active in for quite some time. And, we can, from this, very clearly address the, the long term revenue synergies. The short term revenue synergies which, comes from the joint customer access. I think here, we have a very good insight on the application which we are addressing and where we could gain across selling opportunities back and forth. So So here, we believe that our revenue synergies are on a very substantiated base. And then just one quick follow-up on that, because obviously you said you didn't think about this overnight. Can you maybe talk a little bit about the process that you've gone through, obviously, as far as we're concerned, there's obviously discussions going on last week. But can you talk whether this was something you initiated in terms of the process, whether it was something Chris had initiated, how competitive it was just some color on the process would be really helpful. Here, I hand over to Hammood Castle who is project leader for the acquisition, but definitely, this is a longer term activity we have taken on. As I'm already mentioned by Anna's introductory comments, we have engaged with Cyprus in corporation discussions for quite some time, already. So we have already looked at Cyprus as a company and have learned about their capabilities for a longer time. The actual process has been triggered by another party. And then we were invited about 5 weeks ago to join this process. Okay. That's great. And one final one for me in terms of, whether you think or what regulatory processes you're going to have to to get approval, just to see any risks around that? Obviously, you've been blocked in the U. S. Before on an acquisition. And obviously, both of you have resale business in China So just any thoughts on what steps you're going to need to go through to get the regulatory clearance? Well, yeah, of course, we have looked into this very deeply But we feel reasonably comfortable as far as you can, in this process, we have to go to the well known regulatory approvals like U. S. Vazifius, in China, and then some in Europe and other countries, which we do not see as very critical, but here from the portfolio and the assessment, which we did with the support of external advice, we feel reasonably comfortable. That's great. Thanks guys. In order to give a chance to everybody to ask a question and we take our next person from the queue with Sandeep Deshpande. From JPMorgan. Please go ahead. Yes, hi. Thanks for letting me on. 2 quick if I may. Firstly, regarding your revenue, cost synergies, you're talking about 1,000,000 of cost synergies. I mean, from what you're explaining, there isn't much product over here. So where are these cost synergies going to come from? And are you going to be shutting down any manufacturing capacity that they have or there are some other drivers of these cost synergies? And then secondly, we can see from Cypress's presentation that they have approximately 1 third exposure in the memory market in the no flash market? Is this all no flash that Cypress is exposed to or mainly in the automotive market or is it also exposed outside? And is there a risk that one that in this process, you get a lot more exposure to the consumer nor flash market? So, thank you. The question were the answers will come from Sven and from Jochen. Yes. Hi, Sandeep. So to your question with regard to the cost synergies, you're absolutely right. As we have said, there is limited overlap. It's a very complementary transaction. Therefore, the pure the sheer size of the cost synergies must, must correspond to that statement. It's roughly 9% of the revenue of the target as we said. If you now ask us about where should these cost synergies are coming from, so just to recap 1,000,000 end of 2020 2. We have basically 4 buckets. I mean, the first one is COGS. This is basically procurement savings for materials and manufacturing services. On the R and D side, it's bringing together the roadmaps and reducing overhead Sales and marketing is as mentioned already in our statement. It's the efficiency gains in account coverage for customers and for G And A, it's optimizing corporate services and reducing overhead. If you look at the buckets, there is a chart which you may have a chance to look at later in our equity presentation. The 2 biggest parts are COGS and G And A. Johan, would you be so kind to take the manufacturing question, please? Yes. Hi Sandeep, it's Yohan. So on manufacturing, all we learned and we learned a in due diligence is that the fabs are competitive. We may have to tailor a little bit the portfolio in production, but we believe, the site in Austin, Philippines and Thailand are competitive. In terms of, North Flash, today already 50% the northlash business at Cyprus is related to Automotive. We assume that the share of nor flesh going into infrastructure will increase. Also, there's opportunities with, aders and automated driving levels to sell more into automotive, whereas the already low consumer share will decline over time. So we consider this Norflesh as an attractive business. Thank you. Thank you. And now we'll take our next question from Matt Ramsey from Cowen. Please go ahead. Your line is now open. I guess just a couple of questions for me. The first one, obviously, there's going to be a good bit of debt brought on here by doing the acquisition. I just want to think most of your shareholder base is quite interested in your investments for the long term electric vehicle market and the capacity thereof to do the manufacturing for your power semis. Maybe you could talk a little bit about if any, the financing here to do the acquisition or any of the planned synergies affect your capital investments for the long term in the EV space, And then secondly, for the Cypress portfolio, could you talk about any of the synergy specific to your, automotive portfolio? Thank you. So, Matt, the if we got the question right, then of course, we will not change our investment to harvest from the opportunity we have in the EV market. We see the acquisition in general as complementing and driving and supporting our structural growth drivers. Therefore, the basic strategy has not changed the improvements of the investment ratio comes from the fact that Cypress has a very high level of outsourcing share and does not need to invest a lot in manufacturing. The revenue synergies from Automotive in general, we see as low because here, we see the microcontroller portfolio more as an add on while it is for IPC and PMM and DSS is a systemic complement which drives the revenue synergies. Got it. Thank you very much. Thank you. And I will take our next person from the queue with Amit Hajandani from Citi. Please go ahead. Your line is now open. Good morning all. I'm a search in the earning from Citi, and thanks for letting me on. I'll to one question. I look at your approach towards looking at the market you decided to make longer term investments in Brisbane. You've decided to make 1 in Velark. And now you've done an M and A deal where potentially again, you're talking about really longer term revenue synergy. On the back of this, of course, your balance sheet also gets leveraged for some time and of course be leveraged later. But the question is, do you believe you're placing too much emphasis on longer term growth, longer term orientation at the risk of potentially losing some of the short term flexibility which might be needed potentially given some of the uncertainty out there in the market and some of the geopolitical risks. So I guess strategically, how do you reconcile taking so many longer term bets in these uncertain markets? Thank you. Amit, thank you for your question. I think here, with the financing strategy, which is when we'll explain in a little bit more detail, we are very well balanced on the risk side regarding the long term investment Here, I want to remind that the investment in Filak, for instance, is the cleanroom investment, and we only will incrementally at the capacity, the market grows. So we don't expect a significant overcapacity or let's say, as we managed in the last years, we were able to follow the demand of the market with adding capacity, regarding the Cyprus deal. We see this definitely more as strengthening and complement to the portfolio and the growth opportunities do not require significant changes in the overall market conditions. This is nothing which we have figured in the synergies. Yes. Yes. Maybe just to add 2 things, I mean, on the profitability side and to your question, Amit, on short term benefits, there is an immediate profitability increase and there is a lower capital intensity coupled with higher cash flows. So therefore, we see that as a further enhancement of our business model, also giving us the opportunity to leverage short term opportunities. And secondly, without going into all the details of the refinancing. Again, I think we are contemplating a financing plus refinancing structure in volatile markets, as we all know, which give us also some headroom for all these things you were talking about. So we think it's the sweet spot and therefore we are well placed to do long term growth plus benefit from short term opportunities. With your next question from Jonathan from Liberum. Please go ahead. Your line is now Hi, good morning. Thanks for taking the question. I'm just wondering a little bit on the short term revenue synergy. You've given us a number of 1,000,000,000 by 2020. 5, but when you if you look at the short term cross selling opportunities, how fast do you think by, say, 2020? This transaction completes by the end of this year, will you be able to get some of that in 2020, 2021? And if so, can you give us an idea of what what kind of quantum we're talking about? Would that be a couple of 1,000,000, which could be on a short term low hanging fruit basis that could come through And the second question is also on you had a successful integration with International Rectifier, which presumably has given you some confidence on the integration ability. But having said that, that will have a huge amount of similarity with Infineon being a power semiconductor company and where you could see more scope for sort of synergies and and as well as potentially cross selling. This being quite separate sort of a company altogether. Do you think you will be able to achieve as smooth an integration as you had with international rectifier? Where actually you exceeded some of your targets during that period of time. Thank you, Jonathan, for this question. Let's start with the last one. We have been working with Cyprus or refer some time on various applications. And as the market is moving from pure product thinking to this system solution thinking, we believe that the year, we will have a similar smooth transition by supporting these key applications, which we are addressing, which were also are the base for the synergies Therefore, we are pretty sure that the cooperation, which will be different than the 1 in IR, will be helping us in the integration, of course, the variable integrated may be a little bit more different than before due the nature of the various businesses, but we are very confident that we are able to do it in a similar way. And we have very good examples. I think we mentioned it several times, today, we already cooperate with Cyprus in the, drives market. Therefore, we have a good feeling and as this is the application orientation, we assume it will work quite well with the revenue synergies, maybe Helmut can answer the question. Yes. When we, planning for a closing at the end of 2019, maybe the beginning of 2020, the revenue impact in 2020 will be very limited simply because the design in cycles for the business we are addressing are usually about a year or more. So, we expect the revenue synergies in 2023, about half of what we have communicated for 25 So there will be a substantial pickup in the years following 2021, 2022 to reach that number. Got it. And just one small follow-up, the 19% margin we can expect for 20 itself. If the transaction completes by the end of this year? Jonathan, the year was lost in some peeps Can you rephrase the year that you're focusing on? The 19% margin is the transaction completes at the end of this year, would you be able to achieve that in 2020 in your FY 2020? The segment margin that you've given? Sven will answer. Yes. This is, as we said, this is through through the cycle, Tom model, we expect the 19% to fully come through after the integration the end of the integration, so end of 2022. We will take our next question from Johannes Thales from Deutsche Bank. Please go ahead. Your line is now open. Yes, good morning. Just on the Memory division, Reinhard, you talked a little bit about the different product groups here, also what is outside of the Northwest business. Could you just generally maybe give us a bit of an overview on the strategy for the various product groups and also in particular if you feel like there is anything you may want to exit still on the memory side or if you're generally quite happy with that business. And then just as a as an add on, is there maybe a little bit of detail you can give us also on the debt in terms of what you're paying in terms of interest, for example, etcetera? So Mr. Shanna, thank you for the questions. Jochen has dicked into the memory more deeply and will explain on that side. Yes. Good morning, Mr. Schaller, also from my side. So again, the biggest part in this memory business after exiting the NAND, which is was very important also for us because that's indeed volatile, but they exited it by contributing it into a joint venture with SK Hynix. What remains is, about, 2 thirds is already today towards NOR. And again, NOR Automotive, attractive to us growing with the automated driving, also growing in terms of infrastructure. The remaining third is is about Sram, asynchronous and synchronous Sram, which is, let's say in a very established market, Cypress has a very high market share. So we consider this as a very, attractive business in terms of cash generation. Besides this, they have, some activities or already revenue with a Ferro REM, which is an attractive new technology for very high speed data logging. So we consider overall after the NAND, joint venture, a step as an attractive portfolio in terms of a little bit of growth going forward. So on the SRAM and the FM side, you basically definitely want to continue to invest in these businesses and you see also complimentary applications Yes. The Sram is basically an existing market, which does not require really a lot of new R and D. It's, products that are will run for a long time. The investment cases are the Afram, a little bit around the NOR adding some functionality nor is not to be shrank any further. So small R and D, a lot of cash and complimentary to our target applications. Drew, at on before Sven answers, the interest thing. It was asked you how long we are looking at this target. Last year, the set up with the, memories what was, for us, still very, I would say, let's see, difficult to think about that this would be attractive and this has improved in between significantly. So I want to confirm that the memory is something which we will continue to maintain. And we really like the strong cash flow coming there. So we will do what is necessary And if there is potential from ADAS in the future, we will grab it, but this is a, let's say, lower investment part. And Sven now for you. Yes, Johannes, your question with regard to the debt interest payments So it's very early in the process. So you will understand that I cannot share all the details, but I can give you some background information, how we plan to do it conceptually. So there is a plan, of course, as you can imagine, as we are intending to acquire a U. S. Entity to refinance in partly in dollars, partly in euros, there will be a mix and this mix As you know, from the interest rate differential determines, very much the actual interest payments It is very important for us as we have said that we remain investment grade to have attractive refinancing opportunities and we want to have really have everything on hand, the euro market, the Schuldchian market, the USPP market and so on. So, please bear with us We will fine tune that in the next months, but, we have all options on hand. Understood. Thank you very much. Thank you. And now we'll take our last question from Aditiya Metuku from Bank of America. Please go ahead. Your line is now open. Hi, good morning guys. So two questions. Firstly, just wondered if you could give us a bit more color around the piece of products, what their advantages are, how do they compare versus competition, where exactly these are used? And secondly, I wanted to get some color on what proportion of Cyprus's business is exposed to consumer. And what does it mean for the for Infineon once it's consolidated in terms of what does it due to your consumer exposure, where will it end up? Thank you. Thank you, Ari, for this question. I think the answer on Peace Oak might take a little bit longer. But it is a very competitive overall architecture using a ARM microcontroller course. And here, this is a very intelligent set up how the development is done in order to create families of products being able to address various application needs the arm and different peripherals in a very fast turnaround time. And by this addressing, very clearly the markets around industrial and IoT as well as the automotive market. So the many of the basic architectures are similar. And then there is a portfolio, which is a little bit more seasoned. Which comes from the suspension acquisition, which we also will roll over based with these products Cyprus is not only bringing competitiveness by the product. It's also significantly by the overall software support architecture and software capability. So summarizing very simply, very good set of peripherals standard of the, standard, armed course, easy to put together and complementing this application software. A consumer exposure is not what we are seeing as a major growth area, very clearly, it is more the industrial engine in the IoT range. Of course, pick where we are already today active. Thank you. Just a quick clarification on the consumer exposure. What is the exposure that Cyprus had today to this market? Hamud, can you answer this, please? Yes. I think your basic question to you is what will Infineon end up with, on a statement, consumer exposure will be in the higher single digits. Okay, understood. Thank you. All right. So thank you, everyone, for your questions. We hope we were able to provide some additional clarity around the announced acquisition. We would like to conclude the conference call at this point. For further questions, please feel free to contact us in the IR team in Munich. So thank you very much at this point, and have a good day and week ahead. Bye bye.