Texas Instruments to Acquire National Semiconductor for $6.5 Billion
Two of the oldest names in the chip business are about to combine. About as long as I’ve known about electronics, I’ve known of the names Texas Instruments and National Semiconductor. Today, TI announced it will acquire National for $6.5 billion, representing a 77 percent premium over the $3.4 billion market cap it had as of the close of today’s regular trading. TI will pay $25 a share, nearly $11 north of the $14.07 at which National shares closed.
In a company statement announcing the deal, TI CEO Rich Templeton described the deal as being about “strength and growth.” He said National had done a good job boosting its profitability and reining in expenses, and that the combination will, upon the close, boost TI’s earnings per share.
TI specializes in wireless chips sold into mobile phones while National specializes in analog chips. TI is in the analog chip business too and has 30,000 analog products in its portfolio, which will now be supplemented by the 12,000 analog products that National sells. In one go, analog products will become more than 50 percent of TI’s business.
Another key factor: National’s manufacturing prowess. It owns chip factories–usually referred to as “fabs”–in Maine, Scotland and Malayasia, and TI says it will continue to operate them.
Terms of the agreement call for National shareholders to receive $25 in cash for each share of National common stock they hold at the time of closing. TI expects to fund the transaction with a combination of existing cash balances and debt. As of December 31, TI had about $3 billion in combined cash and short-term investments, and no long-term debt. TI also had access to a variable-rate revolving credit facility that gives it access to a combined $1.9 billion until August 2012; I’m presuming that the remaining $1.5 billion or so will be borrowed. National also has $879 million and change in cash on its books, but a little more than a $1 billion in long-term debt.
Investors seem cautiously optimistic about the deal. TI shares are up slightly in after-hours trading. National shares are naturally soaring by 70 percent to catch up with the valuation of the deal. One other company whose price I just checked is that of Fairchild Semiconductor. It’s a rival to National in the analog and power-management business. Its shares are up 94 cents–or more than 5 percent–after hours, and there’s no mistaking the speculative hope that it could be the next takeover target.
