UPDATE 2-Intel to buy Altera for $16.7 bln to boost data center business – Reuters

* Offer of $54 per share is 10.5 pct premium to Friday close

* Altera shares trading at $51.83, Intel rises marginally

* Deal is third big one in chip industry this year

(Adds details, background)

By Lehar Maan

June 1 (Reuters) – Intel Corp agreed to buy Altera
Corp for $16.7 billion as the world’s biggest chipmaker
seeks to make up for slowing demand from the PC industry by
expanding its line-up of higher-margin chips used in data

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 said on Monday it would offer $54 per share for San
Jose, California-based Altera, a 10.5 percent premium to
Altera’s close on Friday.

Altera’s shares were changing hands at $51.83 in early
trading, while Intel’s were up marginally at $34.48.

The deal price is unchanged from Intel’s unsolicited offer
that sources had said Altera rejected in April.

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

Altera’s programmable chips will allow Intel to increase the
computational capability of its Xeon server chips, which could
be under attack post the Avago-Broadcom merger, Summit Research
analyst Srinivasan Sundararajan told Reuters.

NXP Semiconductors NV set off the latest round of
deals in March when it agreed to buy Freescale Semiconductor Ltd
for $12 billion.


Intel’s deal for Altera is its biggest since it bought
security software maker McAfee in 2011 for $7.7 billion.

It also underscores Intel Chief Executive Brian Krzanich’s
determination to expand beyond chips for PCs, the company’s
mainstay. Intel slashed nearly $1 billion from its first-quarter
revenue forecast in March, saying that small businesses were
delaying upgrading their computers.

Personal computer shipments fell 5.2 percent in the first
three months of this year, extending three years of decline,
according to research firm Gartner.

Net revenue from Intel’s PC group increased just 4 percent
in 2014, generating about 62 percent of total revenue, while
revenue in its data center group increased 18 percent, providing
just over a quarter of overall revenue.

The deal will also help Intel become more involved in the
so-called Internet of Things – the concept of connecting
ordinary household devices to the Internet.

The New York Post reported on Thursday that Intel and Altera
had restarted talks.

Up to Friday’s close, Altera’s shares had risen 41.3 percent
since the Wall Street Journal reported on March 27 that the two
companies were in talks. Intel’s shares rose 14.6 percent.

J.P. Morgan Securities LLC and Rothschild Inc are financial
advisers to Intel. Gibson, Dunn & Crutcher LLP and Weil, Gotshal
& Manges LLP are legal advisers.

Goldman Sachs & Co is Altera’s financial adviser, and Wilson
Sonsini Goodrich & Rosati Professional Corp is legal adviser.

(Reporting By Lehar Maan and Supantha Mukherjee in Bengaluru;
Editing by Ted Kerr)


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