Altera Corp is going to be acquired by Intel Corp for $16.7 billion as the world biggest chip maker seeks to expand into higher margin chips used in data centers. Intel, based in Santa Clara, is known for building chips used in servers and computers.
Altera will help Intel to bundle its processing chips with its programmable chips which are mainly used to speed up web searches. Intel wants to make up for the slowing demand of chips from the PC industry by coordinating with Altera. Intel is offering $54 per share in cash, a 10.5% premium to Altera’s closing price says Reuters.
The deal has valued Altera at about 9 times forward revenue. The deal price has remained the same from the one offered in April which Altera had reportedly rejected.
This deal with Altera will help Intel create a new class of products with improved performance, lower cost and more flexibility. Apart from PC’s and Servers, Intel will now be able to expand into mobile phones (smartphones and tablets) along with other electronics.
The deal is the 3rd biggest deal in the highly fragmented chip industry. The deal is Intel’s biggest deal after the agreement with McAfree in 2011 for $7.7 billion. The deal is expected to close in six to nine months. Altera’s ARM-based and power management chips will continue to be supported and developed by Intel.
Intel already makes chips for Altera, which does not have its foundry. The partnership, set up in 2013, is unusual for Intel, which has traditionally been unwilling to share its technology.
