Intel announced the acquisition of Tower Semiconductor for $5.4 billion

In July last year, the Wall Street Journal reported that people familiar with the matter said that semiconductor giant Intel was considering a $30 billion (about 200 billion yuan) acquisition of the US wafer foundry GlobalFoundries (GlobalFoundries). But after a while, the CEO of GF denied it and said that the IPO would be launched in 2022. In addition to GlobalFoundries, Intel is not without other options.

This afternoon, Intel and Tower Semiconductor announced a definitive agreement under which Intel will acquire Tower for $53 per share in cash, for an aggregate enterprise value of approximately $5.4 billion. Officials said the acquisition significantly advances Intel's IDM 2.0 strategy as the company further expands its manufacturing capabilities, global footprint, and technology portfolio to meet unprecedented industry demands.

Transaction details and time

The transaction is expected to immediately boost Intel's non-GAAP earnings per share (EPS). Intel plans to fund the acquisition with cash on its balance sheet. The transaction is expected to close in about 12 months. The transaction has been unanimously approved by the boards of directors of Intel and Tower Semiconductor and is subject to certain regulatory approvals and customary closing conditions, including Tower Semiconductor shareholder approval.

Intel Foundry Services (IFS) and Tower Semiconductor will operate independently until the transaction closes. During this period, Intel Foundry Services (IFS) will continue to be led by Thakur and Tower Semiconductor will continue to be led by Ellwanger. After the deal, Intel aims to make the two organizations a fully integrated foundry business. At that time, Intel will share more details about the integration plan.

Goldman Sachs served as financial advisor to Intel; Skadden, Arps, Slate, Meagher & Flom LLP and Yigal Arnon served as legal advisor. JP Morgan Securities served as financial advisor to Tower Semiconductor; Latham & Watkins, LLP and FISCHER (FBC & Co.) served as legal advisor.

Intel CEO Pat Kissinger said: "Tower Semiconductor's technology portfolio, geographic reach, deep customer relationships, and service-oriented business philosophy will help expand Intel's foundry services and advance Intel's goal of becoming a major global supplier of foundry capacity. This transaction enables Intel to offer an extremely broad range of advanced nodes and differentiated expertise at mature nodes. In an era of unprecedented demand for semiconductors, the Customers open up new opportunities.”

As an important part of the IDM 2.0 strategy, Intel was established in March 2021, based in the United States and Europe, to provide services to customers around the world to help meet the growing global demand for semiconductor manufacturing capacity. Intel Foundry Services (IFS) currently provides leading-edge process and packaging technologies, committed capacity in the United States, Europe, and the rest of the world in the future, and an extensive intellectual property (IP) portfolio.

Tower Semiconductor's expertise in radio frequency (RF), power, silicon germanium (SiGe), industrial sensors, and its extensive IP, electronic design automation (EDA) partnerships, and proven foundry footprint, will provide extensive coverage for Intel and Tower Semiconductor's global customers. Serving high growth markets such as mobile, automotive, and power, Tower Semiconductor operates a foundry business across regions, with facilities throughout the U.S. and Asia, serving fabless companies and IDM companies, and providing more than 2 million annual Wafer starts capacity, including growth opportunities in Texas, Israel, Italy, and Japan. Tower Semiconductor also offers a "foundry-first" approach to customers, with an industry-leading customer support portal, IP storefront, and design services and capabilities.

Russell Ellwanger, CEO of Tower Semiconductor, said: "Building on a long history, Tower Semiconductor has built an extremely broad range of specialized analog foundry solutions based on deep customer relationships and global manufacturing capabilities. I am extremely proud of this company and our talented and dedicated employees. Together with Intel, we will drive new and meaningful growth opportunities through a complete set of technology solutions and nodes and a greatly expanded global manufacturing footprint, providing greater value to our customers. We look forward to being an integral part of Intel's foundry products."

Dr. Randhir Thakur, general manager of Intel's Foundry Services Group, said: "We are very pleased to welcome the Tower Semiconductor team to Intel. Their decades of foundry experience, deep customer relationships, and technology offerings will accelerate Intel's generation development of foundry services. We are building Intel Foundry Services as a customer-focused technology innovator with an extremely broad range of IP, services, and capabilities. Tower Semiconductor and Intel Foundry Services (IFS) will be in Offers a broad portfolio of foundry solutions globally to achieve our customers' goals."

Intel is a leader in both R&D and manufacturing, including recently announced capacity expansions in Arizona and New Mexico, as well as plans to build a large new base in Ohio. Tower Semiconductor's technology complements Intel's Foundry Services (IFS) advanced process capabilities, allowing the combined company to deliver a wider range of products to customers at scale. With the addition of Tower Semiconductor, Intel is well-positioned to deliver more value to its nearly $100 billion foundry customers.

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