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Highlights
- The Intel Corporation (NASDAQ:INTC) on Tuesday announced to acquire Tower Semiconductor Ltd. (NASDAQ:TSEM) for US$5.4 billion.
- Intel will pay US$53 per share to Tower Semiconductor in an all-cash deal.
- Intel stock rose more than 1%, while Tower stock shot up over 40% in the premarket.
The Intel Corporation (NASDAQ:INTC) on Tuesday, February 15, announced to acquire Tower Semiconductor Ltd. (NASDAQ:TSEM), a leading foundry for analog chips, for US$5.4 billion.
Tower’s analog chips are used in cars, power management, and medical sensors.
The Mountain View, California-based Intel said it entered into a definitive agreement with Tower Semiconductor for the acquisition. Intel will pay US$53 per share in cash to Tower Semiconductor, representing a total enterprise value of US$5.4 billion.
Intel will advance its IDM 2.0 strategy with enhanced manufacturing capacity and specialized chip production with this acquisition. It will also gain a significant global presence and technology portfolio to meet the increasing demand.
Intel said the deal would give the company a strong foothold in the semiconductor industry. The Tower chips are highly demanded in various industries, including electric vehicles.
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The Israel-based Tower Semiconductor has manufacturing sites in Israel, Japan, and Texas, US. It has been investing in these sites to boost the production capacity of 200- and 300-millimeter chips.
Tower caters to companies that design chips but do not manufacture them. It offers wafer starts to the integrated device manufacturing companies.
On January 21, Intel announced to build two new chip factories in Ohio with more than a US$20 billion initial investment. It also pledged an additional US$100 million to create a talent pipeline and strengthen research programs by partnering with the educational institutions to support the company’s new sites.
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The acquisition is expected to close in 12 months, subject to regulatory approval from shareholders, although both companies’ boards have already approved it. After the deal closes, Intel will integrate Tower Semiconductor with its Intel Foundry Services (IFS).
Goldman Sachs & Co. LLC is the financial advisor for Intel, while J.P. Morgan Securities LLC is the financial advisor for Tower.
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Intel’s Financials
Intel’s current market capitalization is US$193 billion, and the P/E ratio is 9.79. The semiconductor company has a dividend yield of 3.97%, with an annualized dividend of US$1.46.
After the announcement, Intel’s stock rose 1.37%. It traded at US$48.23 at 7:45 am ET in the premarket. At the same time, Tower’s stock soared sharply by 41.84% and traded at US$46.99 in the premarket on Tuesday.
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For the nine months ended September 25, 2021, Intel’s net income was US$15.25 billion or US$3.73 per share diluted on revenue of US$58.5 billion. The EPS diluted increased by 5.97% YoY in the nine months.
Tower will likely declare its fourth-quarter and full-year 2021 results on February 17, 2022. Due to this deal, the company said that there would be no guidance for the first quarter of 2022.
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Bottomline
The S&P 500 Semiconductor Equipment Sub Industry Index generated 0.63% in one year, whereas the Intel stock fell 23.83% in the same period. Analysts expect the segment to see robust growth given the semiconductors’ use in almost everything electronic.
