Intel set to acquire Tower Semiconductor for $5.4 billion

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Today, Intel Corporation and Tower Semiconductor, a leading foundry for analog semiconductor solutions, announced a definitive contract. Intel will obtain Tower for $53 per share in cash, representing a total enterprise value of approximately $5.4 billion. The acquisition dramatically advances Intel's IDM 2.0 strategy as it further extends its manufacturing capacity, global footprint, and technology portfolio to handle exceptional industry needs.

The acquisition of Tower Semiconductor increases the speed of Intel's multinational, end-to-end foundry enterprise.

Intel launched the Intel Foundry Services (IFS) in March 2021. The purpose of the IFS is to assist the growing global demand for semiconductor manufacturing capacity and evolve into an influential provider of U.S.- and Europe-based foundry capacity to aid customers worldwide. The IFS currently delivers a leading-edge process and packaging technology, dedicated ability in the U.S. and Europe and other geographies in the future, and a broad intellectual property (IP) portfolio.

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Tower’s specialty technology portfolio, geographic reach, deep customer relationships, and services-first operations will help scale Intel’s foundry services and advance our goal of becoming a major provider of foundry capacity globally. This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated specialty technologies on mature nodes – unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors.

— Pat Gelsinger, Intel CEO

Tower serves high-growth markets such as mobile, automotive, and power. Tower's expertise in specialty technologies, such as radio frequency (RF) power, silicon-germanium (SiGe) and industrial sensors, extensive IP and electronic design automation (EDA) partnerships, and established foundry footprint will supply expansive coverage to both Intel and Tower's customers globally. Tower serves a geographically complementary foundry presence with facilities in the U.S. and Asia serving fabless companies and IDMs and offers more than 2 million wafer starts per year of capacity – including growth opportunities in Texas, Israel, Italy, and Japan. Tower also brings a foundry-first customer approach with an industry-leading customer support portal and IP storefront, as well as design services and capabilities.

With a rich history, Tower has built an incredible range of specialty analog foundry solutions based upon deep customer partnerships, with worldwide manufacturing capabilities. I could not be prouder of the company and of our talented and dedicated employees. Together with Intel, we will drive new and meaningful growth opportunities and offer even greater value to our customers through a full suite of technology solutions and nodes and a greatly expanded global manufacturing footprint. We look forward to being an integral part of Intel’s foundry offering.

— Russell Ellwanger, Tower CEO

Dr. Randhir Thakur, president of Intel Foundry Services, states:

We are thrilled to welcome the Tower team to Intel. Their decades of foundry experience, deep customer relationships, and technology offerings will accelerate the growth of Intel Foundry Services. We are building Intel Foundry Services to be a customer-first technology innovator with the broadest range of IP, services, and capacity. Tower and IFS together will provide a broad portfolio of foundry solutions at a global scale to enable our customers' ambitions.

Intel is the foremost leading-edge player with both research and development and manufacturing in the U.S., including newly publicized capacity additions in Arizona and New Mexico, and plans to construct a new mega-site in Ohio. Tower's technology and manufacturing footprint complement Intel's IFS capabilities in leading-edge processes, permitting the combined company to provide more expansive offerings to customers at scale. With the obtainment of Tower, Intel is strongly positioned to bring more significance to customers spanning the nearly $100 billion addressable foundry market.

The transaction foresees being directly accretive to Intel's non-GAAP EPS. Intel intends to fund the acquisition with cash from the balance sheet.

The transaction is set to close in roughly 12 months. The acquisition is unanimously under approval by Intel's and Tower's boards of directors and is subject to certain regulatory approvals and customary closing conditions, including the approval of Tower's stockholders.

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IFS and Tower Semiconductor will run independently until deal closure; IFS will continue to be led by Thakur, and Tower will continue to be led by Ellwanger during this time. Upon the close of the transaction, Intel's intent is for the two organizations to become a fully integrated foundry business. The company will share more details on integration plans at that time.

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

Tower will issue its fourth-quarter and fiscal year 2021 financials on Feb. 17, 2022. Tower will not guide for the first quarter of 2022 and will not host an earnings conference call in light of the announced transaction.

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