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(Sharecast News) - ON Semiconductor is exploring a potential acquisition of Allegro MicroSystems, it emerged on Monday, as the chip sector looked to consolidate amid an uncertain demand outlook.
According to Bloomberg, the Arizona-based chipmaker had been working with advisers in recent months to assess a deal, though it was unclear whether Allegro was open to a sale.
Bloomberg cited its source as saying other potential bidders could also emerge.
New Hampshire-based Allegro specialises in power and sensing semiconductors used in automotive, industrial and cloud-computing applications.
ON Semiconductor operates in a similar space, developing technologies for power management and motion control.
The speculation drove Allegro's shares up as much as 12% in premarket trading in New York on Monday.
The company, which Bloomberg said had gained 2% this year through to the end of February, has a market value of $4.1bn.
ON Semiconductor, down 25% over the same period, was meanwhile valued at about $19.8bn.
The potential takeover discussions came on the heels of Allegro announcing a leadership change.
Last week, the company appointed longtime executive Mike Doogue as its new chief executive officer, replacing Vineet Nargolwala.
At 1003 GMT, shares in Allegro MicroSystems were up 18.74% in New York at $26.48.
Reporting by Josh White for Sharecast.com.
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