Intel To Acquire Altera For $16.7 Bln

(RTTNews) - The world's largest chipmaker Intel Corp. (INTC) will buy programmable chip maker Altera Corp. (ALTR) for about $16.7 billion in cash, the two companies said Monday. The deal continues a wave of consolidation in the semiconductor industry, as chipmakers grapple with rising costs and weak revenue growth.

Santa Clara, California-based Intel, which mostly makes chips for personal computers and server systems, is looking to grow and diversify with this acquisition amid the waning demand for personal computers with the advent of large screen mobile devices.

The deal is Intel's biggest acquisition, surpassing its $7.7 billion purchase of security software maker McAfee in 2011.

Under the terms of the deal, Intel will acquire Altera for $54 per share. The offer price represents an 11 percent premium to Altera's closing sock price of $48.85 on Friday. However, this is the same offer price that was rejected by Altera in April during an earlier round of talks.

San Jose, California-based Altera is a specialist in programmable chips for consumer electronics, autos and other devices. Altera makes field-programmable gate arrays or FPGAs, processors that can be programmed through software to carry out different functions.

In Mid-May 2015, the New York Post said that Intel and Altera resumed talks on a potential deal of more than $13 billion after it was stalled in early April. Altera had then reportedly rejected an offer of $54 per share. Originally, Intel had discussed an offer of $58 per share, but revised the offer down.

The transaction has been unanimously approved by the Intel and Altera boards of directors, but is subject to certain regulatory approvals as well as approval by Altera's stockholders.

The deal will combine Intel's products and manufacturing process with Altera's FPGA technology. The companies expect the combination to enable new classes of products that meet customer needs in the data center and Internet of Things or IoT market segments.

Further, the companies expect to enhance Altera's products through design and manufacturing improvements resulting from Intel's integrated device manufacturing model.

Brian Krzanich, CEO of Intel said, "Intel's growth strategy is to expand our core assets into profitable, complementary market segments. With this acquisition, we will harness the power of Moore's Law to make the next generation of solutions not just better, but able to do more."

Altera will become an Intel business unit to facilitate continuity of existing and new customer sales and support. Intel plans to continue support and development for Altera's ARM-based and power management product lines.

Intel expects the transaction to be accretive to its adjusted earnings per share and free cash flow in the first year after close. Intel plans to fund the acquisition, which is expected to close within six to nine months,with a combination of cash on hand and debt.

Among other deals in the semiconductor industry, mixed signal solutions provider NXP Semiconductors N.V. (NXPI) said in March that it has agreed to buy embedded processing solutions provider Freescale Semiconductor Ltd (FSL) for about $16.7 billion in cash and stock, including Freescale's net debt of $4.9 billion.

Avago Technologies Ltd. (AVGO) said last Thursday that it will acquire Broadcom Corp. (BRCM) for $37 billion in cash and stock.

INTC is trading at $34.48, up $0.02 or 0.06 percent on a volume of 3.12 million shares.

ALTR is trading at $51.80, up $2.95 or 6.04 percent on a volume of 17.23 million shares.