semiconductor tower (TSEM) Stocks rose on Tuesday after that Intel Corporation (INTC) announced a deal to buy a chip smelter located in Israel for $5.4 billion. TSEM stock jumped more than 40% on the news.
Intel said early Tuesday that it will acquire Tower for $53 a share in cash. Late Monday, the Wall Street Journal reported the impending deal.
This acquisition will accelerate Intel’s plans to become a major plumbing service provider for fabless chip makers.
Intel expects to complete the transaction within approximately 12 months. The company said the deal would immediately add to Intel’s adjusted earnings.
TSEM Skyward Stock Heads
TSEM stock ended Monday’s regular session at 33.13, giving it a market valuation of about $3.6 billion.
Tower makes chipsets for applications ranging from automobiles and consumer electronics to industrial and medical equipment. It operates factories in Israel, Japan and the United States
“Tower’s portfolio of specialized technologies, geographic reach, deep customer relationships and service-first operations will help expand the reach of Intel’s foundry services, advancing our goal of becoming a premier provider of foundry capabilities globally,” said Pat Gelsinger, CEO of Intel. new version.
Intel in investment mode
This news comes as Intel plans to build advanced chip factories to take the lead in technology Taiwan’s semiconductor industry (TSM). Over the past year, Intel has pledged to spend more than $43.5 billion on new chip manufacturing plants, or FABs, in Arizona and Ohio, and expanding a plant in New Mexico.
Wall Street analysts on Tuesday weighed the pros and cons of the deal. On the positive side, the deal expands Intel’s foundry business and allows it to open up into specialized chip markets.
However, analysts said the deal is costly for a company with a low gross profit margin. Semiconductor towers gross margin was 22% last quarter versus 55% for Intel.
“While they overpay for the asset, if TSEM increases Intel’s plumbing prospects, no one will care,” Wedbush analyst Matt Bryson said in a note to clients.
TSEM stock ranks seventh out of 41 stocks in IBD’s semiconductor industry group, according to IBD stock check. she has IBD Compound Classification out of 88 out of 99. Intel ranks 22nd in the group with an IBD composite rating of 60.
Tower Corporation plans to report its fourth-quarter financial results as early as Thursday.
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