Intel’s Tower Semiconductor Acquisition Topples as Computer Giant Scraps Takeover
Key takeaways
- Intel’s $5.4 billion acquisition of chip maker Tower has fallen through
- China failed to give the deal regulatory approval in time for the deadline
- Intel shares sank 5% and Tower’s stock price plunged 11%
Intel has been forced to cancel its $5.4 billion takeover of chip maker Tower as the deal failed to achieve regulatory approval. It’s a blow to both parties, with the stocks plunging as a result, but not exactly unexpected given which country was responsible for the deal falling through. Here’s everything you need to know.
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Why has Intel canceled the Tower takeover?
U.S. chip maker Intel has officially scrapped its $5.4 billion takeover of Israeli chip maker Tower Semiconductor Ltd after the merger agreement expired without the required regulatory approval in place.
China failed to grant the merger approval in time for the deal to go ahead, in a blow to Intel’s plans to build out its foundry business (companies that make semiconductors). The Tower deal would have given Intel access to the radio frequency and industrial markets Tower caters to.
“After careful consideration and thorough discussions and having received no indications regarding certain required regulatory approval, both parties have agreed to terminate their merger agreement having passed the August 15, 2023 outside date,” Tower Semiconductor said in a statement.
Tower’s shares fell 11% at the news in premarket trading and closed at $33.78 on Tuesday, which is $20 less than the original share price in the deal. Intel suffered close to a 5% decline.
Semiconductors: A new geopolitical battleground
Intel has lost market share to the Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung in recent years, but the move from China underscores the simmering tensions between the country and the U.S. on who controls the future of tech.
Last week President Biden signed an executive order banning U.S. venture capital and private equity firms from investing in certain Chinese companies that cover AI, semiconductor chips and quantum computing. The White House said the move was for protecting national security, but China accused the U.S. of attempting to “politicize and weaponize trade”.
But China had already made similar moves, banning Chinese companies from buying from U.S. chip maker Micron and limiting exports of gallium and germanium, both crucial parts of manufacturing semiconductor chips.
The bottom line
Given the geopolitical background, the aborted merger is a disappointing yet unsurprising event. Intel has already pledged to build out its foundry business regardless, so the stock will likely recover from this blow. It’s possible we could see further takeovers cancelled in light of the U.S. and China situation.
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