News Article
TI to acquire National Semiconductor
Two of the oldest manufacturers in the industry are to join forces but National shareholders not happy
Texas Instruments Incorporated and National Semiconductor have announced they have signed a definitive agreement under which TI will acquire National for $25 per share in an all-cash transaction of about $6.5 billion. The acquisition combines two industry leaders in analogue semiconductors, each with unique strengths in delivering products to improve performance and efficiency and convert real-world signals in electronic systems. The boards of directors of both companies have unanimously approved the transaction.
"This acquisition is about strength and growth," said Rich Templeton, TI's chairman, president and chief executive officer. "National has an excellent development team, and its products combined with our own can offer customers an analogue portfolio of unmatched depth and breadth. In recent years, National's management team has done an outstanding job of improving margins and streamlining expenses, which upon close will increase TI's profitability and earnings per share, excluding transaction costs. Our ability to accelerate National's growth with our much larger sales force is the foundation of our belief that we can produce strong returns on our investment. The combined sales team will be 10 times larger than National's is today, and the portfolio will be exposed to more customers in more markets."
"Our two companies complement each other very well," said Don Macleod, National's chief executive officer. "TI has much greater scale in the marketplace, with its larger portfolio of products and its large global sales force. This provides a platform to enhance National's strong and highly profitable analogue capability, power management in particular, leading to meaningful growth."
Each company has its own strengths including the breadth of TI's 30,000 analogue products, extensive customer reach, and industry-leading manufacturing including the world's first 300-millimeter analogue factory. National brings a portfolio of 12,000 analogue products, a strong position with customers in the industrial power market, and excellent customer design tools. Upon close of the transaction, National becomes part of TI's analogue segment, and sales of analogue semiconductors will represent almost 50 percent of TI's revenue.
The combined company also will benefit from National's manufacturing operations, located in Maine, Scotland and Malaysia, which TI will continue to operate. Each site has additional capacity to increase production. National's headquarters will remain in Santa Clara, California.
Under terms of the agreement, National stockholders will receive $25 in cash for each share of National common stock they hold at the time of closing. TI expects to fund the transaction with a combination of existing cash balances and debt. The acquisition is subject to customary closing conditions, including review by U.S. and international regulators and approval by National's shareholders. The transaction is expected to close in six to nine months.
Not everyone was happy with the announcement as within hours investigations on behalf of National Semiconductor investors over possible breaches of fiduciary duty were announced by more than one representing firm. The investigations by law firms concern whether certain directors and officers at National Semiconductor Corporation or others breached their fiduciary duties in connection the proposed takeover. In response to the takeover announcement shares of National Semiconductor rose in after hour trading to $24.30 per share.
However, under the terms of the agreement, National Semiconductor may not solicit acquisition proposals from third parties and the agreement includes a $200 million termination fee. Furthermore National Semiconductor Corporation reported relatively consistent financial results over the past two 52/53week filing periods. Its 53week Total Revenue was roughly at $1.4billion. However National Semiconductor Corporation was able to increase its Net Income over the same time frame from $73.30million to lately $209.20million.
Therefore the investigation concerns whether the National Semiconductor Board of Directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of National Semiconductor breached their fiduciary duties to National Semiconductor shareholder by failing to adequately shop the company before entering into any transaction. The investigation concerns also whether Texas Instruments would underpay for National shares, thus unlawfully harming National Semiconductor investors. A potential class action lawsuit would seek to maximize the amount of money and information National shareholders would receive in a buyout, so the law firm. Frank Quattrone's technology friendly boutique investment bank was involved in advising the companies on the merger raising the ire of traditional banks upset at his sales methods. Publically released figures show the executives of National Semiconductor making a number of large share transactions over the last month.
The market for analogue semiconductors was $42 billion in 2010. TI is the market leader with 2010 analogue revenue of $6.0 billion, or 14 percent of the market. National's revenue in calendar year 2010 was about $1.6 billion, or 3 percent of the market.
