Leading Chip Designer to Buy Global Foundry Firm for $5.4B

Source: Streetwise Reports   02/15/2022

Shares of Tower Semiconductor Ltd. traded 42% higher after the company reported it entered into a definitive agreement to be acquired by Intel Corp. in an all-cash transaction for $53.00 per share.

This morning before U.S. markets opened for trading, leading Israel-based analog semiconductor foundry and solutions company Tower Semiconductor Ltd. (TSEM:NASDAQ), announced that it entered into a definitive agreement to be acquired by silicon chip designer and manufacturer Intel Corp. (INTC:NASDAQ) for $53 per share in cash, which represents a total enterprise value for the company of around $5.4 billion.

The report advised that by acquiring Tower Semiconductor, Intel will be able to greatly advance its IDM 2.0 strategy. The transaction allows Intel to expand manufacturing capacity and further increase its global footprint to meet unprecedented market demand.

Intel’s CEO Pat Gelsinger commented, “Tower’s specialty technology portfolio, geographic reach, deep customer relationships and services-first operations will help scale Intel’s foundry services and advance our goal of becoming a major provider of foundry capacity globally…This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated specialty technologies on mature nodes – unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors.”

The report mentioned that Intel formed Intel Foundry Services (IFS) in March 2021 as a key part of its IDM 2.0 strategy in order to meet increase in global demand for semiconductor production capacity. As part of its IDM 2.0 strategy, the firm has focused on becoming a major provider of foundry capacity in the U.S. and Europe.

According to the report, “Tower’s expertise in specialty technologies, such as radio frequency (RF), power, silicon-germanium (SiGe) and industrial sensors, extensive IP and electronic design automation (EDA) partnerships, and established foundry footprint will provide broad coverage to both Intel and Tower’s customers globally.” Tower has a strong presence in the high-growth automotive, mobile and power markets and has the capability of offering over two million wafer starts per year.

Tower Semiconductor’s CEO Russell Ellwanger remarked, “Tower has built an incredible range of specialty analog foundry solutions based upon deep customer partnerships, with worldwide manufacturing capabilities…Together with Intel, we will drive new and meaningful growth opportunities and offer even greater value to our customers through a full suite of technology solutions and nodes and a greatly expanded global manufacturing footprint. We look forward to being an integral part of Intel’s foundry offering.”

Intel Foundry Services President Dr. Randhir Thakur, added, “We are thrilled to welcome the Tower team to Intel. Their decades of foundry experience, deep customer relationships and technology offerings will accelerate the growth of Intel Foundry Services. We are building Intel Foundry Services to be a customer-first technology innovator with the broadest range of IP, services and capacity. Tower and IFS together will provide a broad portfolio of foundry solutions at global scale to enable our customers’ ambitions.”

The report advised that each of the companies’ respective Boards of Directors have already unanimously approved the transaction which is expected to close in about 12 months. The acquisition remains subject to approval by Tower’s shareholders, ordinary closing conditions and various regulatory approvals.

Intel plans to make the purchase using existing cash on its balance sheet and believes the purchase of Tower will be immediately accretive to its non-GAAP earnings per share.

The report advised that until the transaction is completed, Intel Foundry Services and Tower Semiconductor will continue to operate as independent enterprises.

Tower Semiconductor advised that it plans to report Q/21 and FY/21 financial results on Thursday, February 17, 2022, but due to today’s announcement it will not offer any forward guidance for Q1/22.

Intel is headquartered in Santa Clara, Calif. and is a pioneer and global leader in the design and manufacture of semiconductors. The firm’s products are used by a wide range of computing devices that embed intelligence across the cloud, computing devices and networks.

Tower Semiconductor stated that it is “the leading foundry of high value analog semiconductor solutions that provides technology and manufacturing platforms for integrated circuits (ICs) in growing markets such as consumer, industrial, automotive, mobile, infrastructure, medical and aerospace and defense.” The company’s modular and customizable processes are available to meet the needs of customers on either 150mm, 200mm or 300mm wafers. The firm offers its clients multi-fab sourcing and extended capacity. The company owns manufacturing facilities in Israel, Japan and the U.S., along with shared JV interest in a facility in Italy.

Tower Semiconductor began the day with a market cap of around $3.6 billion with approximately 108.0 million shares outstanding. TSEM shares opened nearly 42% higher today at $46.98 (+$13.85, +41.81%) over yesterday’s $33.13 closing price and reached a new 52-week high price this morning of $47.47. The stock has traded today between $46.43 and $47.47 per share and is currently trading at $47.01 (+$13.88, +41.90).

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