Sep 09, 2015 Uncategorized Comments Off on Intel-Altera Merger Hurdles Review, Wall Street Yawns (Investor's Business Daily)
September 9, 2015
By ALLISON GATLIN
INVESTOR’S BUSINESS DAILY
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Wall Street responded with a collective shrug Wednesday after Intel‘s (NASDAQ: INTC) pending $16.7 billion acquisition of chipmaker Altera (NASDAQ: ALTR) passed its first regulatory hurdle Tuesday.
Intel stock fell a fraction Wednesday, and Altera stock was flat at 50.20, after their shares rose 3.4% and 2.2%, respectively, on Tuesday.
Summit Research analyst Srini Sundararajan said the Department of Justice and Federal Trade Commission could have asked for more information, thus delaying the merger, but didn’t.
“Thankfully for Intel-Altera, the HSR (Hart-Scott-Rodino) hurdle is over,” he wrote in a research report Wednesday.
The merger was announced June 1. Boards for both companies unanimously approved the deal, which will be an all-cash transaction at $54 per share, Intel CFO Stacy Smith said in the merger announcement.
Smith expects the merger to be complete by the end of 2015 or during Q1 2016. He predicted that the deal would be accretive to Intel’s earnings per share ex items during the first year after closing.
Following the HSR review — during which the FTC determines whether the merger will adversely affect U.S. commerce — the deal still requires approval from the European Union, Taiwan, China, South Korea and Japan.
Once completed, Altera will operate as an Intel business unit.
Altera will continue manufacturing systems on a chip (SoC) that incorporate ARM Holdings’ (NASDAQ: ARMH) processor and field programmable gate array (FPGA) designs, Intel CEO Brian Krzanich said during Intel’s Q2 earnings conference call. ARM is a big rival of Intel’s in mobile chips.
Krzanich’s promise staved off additional regulatory questions, Sundararajan wrote.
Sundararajan predicted that cloud technology will account for 25% year-over-year increases in data center sales for Intel, compared with a projected 12% increase for non-cloud activities. Already, the data center accounts for 40% of Intel’s sales.
The HSR review finished amid rumors of layoffs pending the completed merger. Some Altera employees have been informed that they will be laid off effective Oct. 1, a person close to the situation has told IBD.
Intel layoffs began in June when about 1,100 employees were issued “involuntary separation” packages, according to the Oregonian, which reportedly obtained an internal company memo. Intel has operations in Oregon.
Before the Altera deal, Intel in April said it would cut R&D spending by $300 million this year.
Asked to comment on layoffs, Cara Walker, an Intel spokeswoman, told IBD via email: “We plan to sustain and grow Altera’s existing business as well as invest in exciting new products. Altera employees are a very important part of this transaction.”
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