Intel Corp. said it’s walking away from its attempt to acquire Tower Semiconductor Ltd., abandoning a $5.4 billion deal after failing to win regulatory approval in time.
(Bloomberg) — Intel Corp. said it’s walking away from its attempt to acquire Tower Semiconductor Ltd., abandoning a $5.4 billion deal after failing to win regulatory approval in time.
Intel Corporation has mutually agreed with Tower Semiconductor to terminate the Feb. 2022 agreement, it said in a statement Wednesday. The Israeli firm confirmed the deal was scrapped. The two companies were expected to call off the deal after failing to get Chinese approval, Bloomberg News reported earlier.
Tower shares fell as much as 10% in Tel Aviv, the biggest intraday decline since 2020, and were down a similar amount in US premarket trading.
The purchase of the Israeli company was the keystone of Intel Chief Executive Officer Pat Gelsinger’s plan to get into a faster-growing part of the semiconductor industry, the foundry market dominated by Taiwan Semiconductor Manufacturing Co. Tower has a relatively small presence in that area — where companies make chips for clients on a contract basis — but has expertise and customers that Intel lacks.
“We will continue to look for opportunities to work together” with Tower in the future, Gelsinger said in the statement.
Intel will pay Tower a termination fee of $353 million.
Sanford C. Bernstein analyst Stacy Rasgon said the deal’s failure wouldn’t be a huge surprise given the slide in Tower’s share price, but it would be a setback for Intel.
“A failed deal does seem modestly disappointing for the prospects of Intel’s foundry efforts,” he wrote in a research note after Bloomberg’s story. “Overall Intel’s foundry efforts were never going to be easy even with Tower, but now may prove to be even more challenging without.”
When the transaction was announced, Intel said it would take “about 12 months.” As of October, the chipmaker said it was targeting the first quarter 2023, but then in March warned that the date might slip into the second quarter.
The deadline for completing the transaction was Aug. 15 at midnight in California.
Increasing tension between China and the US has made securing approval for transactions that require the signoff from regulators in Beijing and Washington increasingly difficult, particularly those involving semiconductors, a key area of friction in the relationship.
Read More: Intel to Buy Israel’s Tower Semiconductor for $5.4 Billion
While Tower is a fraction of the size of Intel and TSMC in terms of revenue, it’s active in older types of production-making chips for big customers such as Broadcom Inc. Intel’s plan was to combine plants in its network as they age with Tower’s customer list. Though they don’t require the state-of-the-art production techniques that an Intel or Nvidia Corp. processor demands, many new types of chips for markets like electric vehicles can be made in these older plants.
Investors had already discounted the chances of the deal being completed. US-traded stock of Tower has declined 22% this year, compared with the general advance in chip stocks. It closed Tuesday at $33.78. Intel had offered $53 a share.
(Updates with shares in third paragraph.)
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