Intel acquires Altera for $17 bn

Intel Corporation, the world's largest computer chip maker, is acquiring smaller rival Altera Corp for $16.7 billion as it tries to offset slowing demand from the PC industry by expanding its line-up of higher-margin chips used in data centres.

Intel CEO Brian Krzanich (l) and John Daane, chairman, CEO snd president, Altera

This is the biggest acquisition for the the $160-billion market cap Intel.

Earlier this week, media reports had reported that the two had been engage in deal talks (See: Intel may acquire smaller chip Altera for $15 billion: reports).

By combining with Altera, Intel will be able to bundle its processing chips with the smaller company's programmable chips, which are used, among other things, to speed up web-searches.

Intel Corporation and Altera Corporation on Monday announced a definitive agreement under which Intel would acquire Altera for $54 per share in an all-cash transaction valued at approximately $16.7 billion.

Intel said on Monday it would offer $54 per share in cash, a 10.5 -per cent premium to Altera's closing price on Friday.

San Jose, California-based Altera had rejected an earlier unsolicited offer of $54 per share from Intel in April, reports quoting sources close to the developments said.

The acquisition will couple Intel's leading-edge products and manufacturing process with Altera's leading field-programmable gate array (FPGA) technology.

The combination is expected to enable new classes of products that meet customer needs in the data center and Internet of Things (IoT) market segments.

Intel plans to offer Altera's FPGA products with Intel Xeon processors as highly customised, integrated products. The companies also expect to enhance Altera's products through design and manufacturing improvements resulting from Intel's integrated device manufacturing model.

"Intel's growth strategy is to expand our core assets into profitable, complementary market segments," said Brian Krzanich, CEO of Intel.

"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. Whether to enable new growth in the network, large cloud data centers or IoT segments, our customers expect better performance at lower costs. This is the promise of Moore's Law and it's the innovation enabled by Intel and Altera joining forces,'' he added.

"Given our close partnership, we've seen firsthand the many benefits of our relationship with Intel - the world's largest semiconductor company and a proven technology leader, and look forward to the many opportunities we will have together," said John Daane, president, CEO and chairman of Altera.

"We believe that as part of Intel we will be able to develop innovative FPGAs and system-on-chips for our customers in all market segments. Together, we expect to drive meaningful value for our customers, partners and employees around the world.''

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.

The transaction is expected to be accretive to Intel's non-GAAP EPS 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 from the balance sheet and debt.

The transaction, which has been unanimously approved by the boards of Intel and Altera, is subject to certain regulatory approvals and customary closing conditions, including the approval of Altera's stockholders.

JP Morgan Securities LLC and Rothschild Inc are serving as financial advisors and Gibson, Dunn & Crutcher LLP and Weil, Gotshal & Manges LLP are serving as legal advisors to Intel. Goldman.

Sachs & Co is serving as the exclusive financial advisor to Altera and Wilson Sonsini Goodrich & Rosati is serving as legal advisor to Altera.

The deal is the third big one in the highly fragmented chip industry this year. Avago Technologies Ltd agreed last week to buy Broadcom Corp for $37 billion in the industry's biggest-ever takeover.

The deal, Intel's biggest since it bought security software maker McAfee in 2011 for $7.7 billion, follows the expiry on Monday of a standstill agreement between the companies.

The companies said they expected the deal to close in six to nine months.