Intel Corp. said it agreed to buy Altera Corp. for $16.7 billion in a deal that will take out yet another chipmaker and add to a record year for industry consolidation.
The world’s largest chipmaker will pay $54 a share in cash for the maker of programmable logic semiconductors, Intel said Monday in a statement. That’s a premium of 11 percent over Altera’s closing share price on Friday and 56 percent from March 26, the day before the possibility of a transaction was first reported, Bloomberg said.
Intel, like other chipmakers, is seeking a way to mitigate slowing growth amid rising costs and trying to defend its most profitable business. The largest deal ever in the $300 billion semiconductor business was announced last week when Avago Technologies Ltd. agreed to buy Broadcom Corp. for $37 billion.
“Management teams are looking at their business and predicting little growth going forward,” said Gus Richard, an analyst at Northland Securities Inc. “The M&A wave is a function of them trying to drive earning growth. Intel’s purchase of Altera is one of the few strategic moves that is being made currently.”
Intel’s Altera purchase and Avago’s Broadcom deal makes 2015 already a record year for semiconductor deal making.
The Altera purchase will add to Intel’s non-GAAP earnings per share and free cash flow in the first year after it closes, which is expected within six to nine months, the company said. It will be funded with cash and debt.
Rejection
Altera earlier rejected an Intel bid, spurring some shareholders to pressure Altera to reconsider an offer they thought valued the company higher than it would be on its own.
Intel has been looking for growth beyond the struggling personal-computer market, which has been declining since it peaked in 2011. Altera chips are used in a variety of markets ranging from communications to consumer electronics.
Altera’s devices can have their function updated, even after they’ve been installed in end-devices. While they’re sold in relatively small volumes, programmable logic usually requires the latest in production technology because it’s some of the largest chips in the industry.
Intel Chief Executive Officer Brian Krzanich is trying to find more customers, outside of his own chip business, for Intel’s factory network, which the company says is the most advanced in the industry.
