Intel Corporation Buys Altera for $16.7 Billion as Industry Consolidates

As a result of the deal, Intel will pay $54 per share for Altera, a manufacturer of programmable logic semiconductors.

Intel Corporation (NASDAQ:INTC) has agreed to buy Altera Corporation (NASDAQ:ALTR) for $16.7 billion in an all-cash deal that will see the chipmaking industry consolidate further, according to an Intel statement.

As a result of the deal, Intel will pay $54 per share for Altera, a manufacturer of programmable logic semiconductors, which is a jump of 11% over last Friday’s closing price.

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Like other chipmaking companies, Intel is facing an industry slowdown, and is seeking a panacea to help mitigate slowing growth and rising costs. Just last week, the largest deal ever in the $300 billion semiconductor business was culminated, when Avago Technologies Ltd. (NASDAQ:AVGO) agreed to buy Broadcom Corp. (NASDAQ:BRCM) for $37 billion.

Intel Corp’s Altera purchase will augment Intel’s non-GAAP earnings per share and free cash flow in the first year after it closes, which is expected within six to nine months, the company said – the deal will be funded with cash and debt.

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This is not the first time Intel Corp has made a play for Altera, having already been spurred by an earlier rejected bid. It is no secret that Intel Corp has beeen on the prowl for growth beyond the lagging personal-computer market, which has itself witnessed a decline off of 2011 peaks YoY. Altera’s chips are one way to allay these concerns, given their use in a number of markets, ranging from communications to consumer electronics.

Intel Corp’s acquisition of Altera also represents a bid to fortify its most profitable business, i.e. supplying server chips used in data centers. Sales of semiconductors for personal computers are declining given shifting consumer interests that are gravitating towards tablets and smartphones to get online, however, data centers needed to churn out information and services for those mobile devices are driving orders for higher-end Intel processors driving profitability.

At the time of writing, shares of Intel Corp (NASDAQ:INTC) were trading at $34.29 during morning trading on news of the deal. Alternatively, Altera (NASDAQ:ALTR) shares have settled just south of $52 handle at $51.82, up 6.06% Monday.

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