The long pending merger between top chipmakers is finally taking shape as Intel and Altera resume talks. The immaterialized discussion earlier this year looks to come to a conclusion now finally.
American chipmakers Intel Corporation (INTC, Financial) and Altera Corporation (ALTR, Financial) have resumed talks on a tie-in as per New York Post, which was left unconcluded in the past. The said deal can go up to $13 billion, which will make it Intel’s biggest acquisition ever. Shares of both the companies went up after the news of Altera’s shares going up 7% to $47.50 and Intel’s shares rising to $33.15 in the premarket trading on May 18.
The unfulfilled deal
The California based American multinational technology company, Intel Corporation, is one of the world’s highest and largest valued semiconductor chipmakers on the basis of revenue. Founded in 1968, the company is famous for its inventions of x86 series of microprocessors often used in personal computers. On the other hand Altera Corporation is a California-based American manufacturer of Programmable Logic devices and reconfigurable complex digital circuits that was founded in 1983.
Both of the top-notch companies had entered discussions to merge with each other, which were left unfulfilled partly due to non-agreement on the price as per reports.
Earlier this year in March, Intel had made a bid worth $13.4 billion to takeover Altera, which could prove to be a big acquisition for Intel as compared to its past acquisitions, which were way smaller. Both the companies had experience of working together in the past wherein Intel had agreed to provide its most advanced production process to Altera. By taking over Altera, Intel had its intentions to strengthen the manufacturing partnership of both the companies and continual business for Intel. Chips made by Altera are widely used in the wireless base stations connecting cellphone users, which was another reason why Intel wanted to have a tie-in with Altera. This will give a much-required lead to Intel in the mobile market. At that time, Altera’s revenues were recorded to be faster than Intel’s –Â Altera’s up by 12% to $1.93 billion last year whereas Intel’s went up 6.1% to $55.9 billion, which made it a good choice for Intel to merge with Altera and create a fast growing business combination.
Investors had given a welcome note to the deal, which had led to Intel’s shares going up 6.4% to $32. Even Altera shares saw a rise of a whopping 28% to $44.39 after a series of setbacks.
Worrisome situation for both
Other than on-and-off gains, both the companies in general had been going through a rough phase. While Altera with no self-owned factory was running through the help of Taiwan Semiconductor Manufacturing Co. (TSM, Financial), Intel on the other hand was also suffering for the past few years since consumers shifted their focus to laptops and mobile phones instead of PCs. Rivals like Qualcomm (QCOM, Financial) were too strong to be left behind by Intel in the smartphone market. The stated concerns had been affecting revenues and growth of both the companies.
Present situation
Last month, Altera had rejected Intel’s offer of $54 per share for a buyout; however, investors showed their hopes on the deal as the company’s shares have gone up 2.5% since then. If the deal cracks this time, analysts have suggested a possibility of it being done through debt and shares because if Intel decided to fund the deal through cash, almost all of the $14 billion spare cash of the company will go in it. Few of the analysts had doubted that Intel’s proposed tie-in with newbie eASIC might affect its deal with Altera; however, analyst Stacy Rasgon from Bernstein Research denies it, stating, “It is a whole other level of programmability”. Concluding all pointers, the deal might materialize this time while at the same time, Altera’s competitor Xilinx (XLNX, Financial) might be taken over by Avago technologies (AVGO, Financial).
