The TI-National Semi Deal:
April 5, 2011
As reported, Texas Instruments Inc. signed adefinitive merger agreement to acquire National Semiconductor Corp. for $6.5billion in cash, the company said Monday (April 4).
Here's what analysts were saying about the deal:
Craig Berger, an analyst with FBR, said: ''We think this deal makessense, with TI the only likely bidder and the best strategic fit for NationalSemi. The $6.5B purchase price (is) not inexpensive considering National'sgrowth rate, but likely not that expensive either considering the manufacturingsynergies and cost reductions that TI is likely to achieve in coming years.
Indeed, TI is now an even bigger analog competitor than before with TI andNational combining to claim about 18 percent global analog market share,meaningfully ahead of closest peers Analog Devices (6 percent), Maxim (6 percent),Linear Technology (4 percent), and Intersil (4 percent).
One main motivation for this deal is that it adds about 12,000 new parts toTI's analog product stable.While TI said that it is likely to keep usingNational's 150-mm and 200-mm fabs given their mid-60% utilization rates and lowmanufacturing costs, we believe a real cost opportunity exists for TI to slowlymove National's production out of those facilities and into TI's 300-mmfacilities.''
Bobby Burleson, an analyst with Canaccord Genuity, said: ''We continueto rate TXN shares 'HOLD' given our view that investors are likely to gravitatetoward product cycle stories at this point in the semiconductor cycle. Productoverlap is minimal as TXN's analog portfolio focuses primarily on thecommunications and computing markets (64 percent of 2010 revenue) andindustrial is the largest market for NSM (46 percent of 2010 revenue).Following the completion of the acquisition, analog will account for almost 50percent of
Texas Instruments revenue.
Management would like to reverse share loss seen recently for certain NSMproduct areas (wireless) and deliver growth for NSM product commensurate to itsown goal of 2x the industry. The company also expects to benefit from NSM'smanufacturing operations, which are running at approximately 60 percentutilization.''
Market research house IHS iSuppli, said: ''Based on final results fromthe year 2010, the National acquisition would make Texas Instruments the world'sthird largest semiconductor company. This would allow Texas Instruments to riseone place in the rankings from fourth place, supplanting Japan's Toshiba Corp.
With in the analog segment, the acquisition will particularly bolster TexasInstruments lead in the market for voltage regulators. Texas Instruments wasthe leading voltage regulator supplier in 2010, with $1.7 billion in revenueand a share of 18.1 percent. National was the third largest supplier, with $758million in revenue and 15.2 percent in revenue. With the acquisition, TexasInstruments' voltage regulator revenue would amount to $2.4 billion in 2010,giving it a 26.5 percent share of the market.
The acquisition also will bolster Texas Instruments' dominant position inanother segment of the analog market: analog/comparator integrated circuits.Texas Instrument in 2010 earned $932 million in analog/comparator revenue,giving it a 24.6 percent share of the market.''
IMS Research said: Texas Instruments' acquisition of NationalSemiconductor for $6.5 billion will create a giant that dominates the power ICfield, according to IMS Research.The combination of these two titans willrepresent about 17 percent of the power management and driver IC market, or$2.2 billion in revenue, whilst their share of the LED IC market will stand atover 25 percent.
IMS Research senior power analyst Ryan Sanderson commented: "Assuming that thedeal is waived through by the regulators, TI, once it completes the acquisitionand integration of National, would have just over twice the market share of #2ranked Infineon, assuming previous years' results."
The merger will also consolidate the two companies' leadership positions insome emerging areas such as LED driver ICs. IMS Research ranked TI and National#1 and #2 respectively in 2010 and the combined share of the new company isestimated at 26 percent.
Jamie Fox, senior LED lighting analyst at IMS Research, commented: "We estimatethat TI held around 19 percent of this market in 2010, whilst National took 7percent. The new combined company will be four times bigger than its nearestcompetitor in this high growth market, which was worth nearly $1 billion in2010."
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