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This is from today’s (3/6/11) New York Times “DealBook”:
Texas Instruments to Buy National Semiconductor for $6.5 Billion
Texas Instruments said on Monday afternoon that it had agreed to acquire National Semiconductor for $6.5 billion in cash.
The deal would combine two leaders in analog semiconductors, a $42 billion market last year. Analog chips process continuous signals, as opposed to 1’s and 0’s, and are used in thousands of products, many of them digital, from cameras to medical products.
Under terms of the agreement, National stockholders will receive $25 in cash for each share, a premium of 78 percent to National Semiconductor’s closing stock price on Monday. The deal values National Semiconductor at nearly 10.6 times earnings before interest, taxes, depreciation and amortization, a high multiple compared with many of its rivals.
“This acquisition is about strength and growth,” said Rich Templeton, the Texas Instruments chief executive, said in a statement. “National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth.”
“The combined sales team will be 10 times larger than National’s is today,” he added, “and the portfolio will be exposed to more customers in more markets.”
Texas Instruments said its plans to use cash on its books and debt to finance the acquisition. Texas Instruments has more than $3 billion in cash, according to Capital IQ. Morgan Stanley is providing $2.5 billion in financing.
The deal is the largest for Texas Instruments since 2000, when it acquired Burr-Brown, another analog chip maker, for $7.6 billion in stock.
And at a time when merger activity is on the upswing, the deal for National Semiconductor is one of the biggest technology acquisitions in the last 12 months, dwarfed only by Intel’s $7.7 billion purchase of McAfee in August.
The deal would be the fifth-biggest semiconductor acquisition since 2000, according to Thomson Reuters data.
The merger agreement has a $350 million break-up fee, according to a regulatory filing.
Morgan Stanley and the law firm of Jones Day advised Texas Instruments. Qatalyst Partners — Frank Quattrone’s firm — and Goldman Sachs advised National Semiconductor. The law firm of Latham & Watkins served as legal counsel to National Semiconductor.
Top U.S. Semiconductor M&A Since 2000
|Date||Target||Acquiror||Value ($ millions)|
|7/10/2000||SDL Inc.||JDS Uniphase||40,992.57|
|9/15/2006||Freescale Semiconductor||Private equity consortium||17,454.53|
|1/17/2000||E-Tek Dynamics||JDS Uniphase||15,252.55|
|4/4/2011||National Semiconductor||Texas Instruments||6,502.28|
|8/27/2000||MMC Networks||Applied Micro Circuits||4,424.23|
|12/4/2006||Agere Systems||LSI Logic||3,779.61|
Source: Thomson Reuters
NOTE: Undoubtedly, as the T.I. CEO stated, “this acquisition is about strength and growth” – for T.I., as it consolidates market power in a critical oligopolistic industry. There are no constraints any more from anti-monopoly laws. According to Barry Lynn, “The Meltdown [of 2008] also accomplished what many long-term predations by big industrial firms against smaller rivals had failed to do. One of the most notable collapses was the October 2008 decision by the semiconductor maker Advanced Micro Devices – which for more than a decade has been fingered for extinction by giant Intel – to offload its manufacturing arm and try to survive as a pure design firm.” 
That kind of restructuring is not listed in this article, which only reports on acquisition. The crucial semiconductor industry is continuing to consolidate, in both the digital and analogue areas, to the advantage of the surviving firms and the ultimate disadvantage of customers in the semiconductor market, ultimate consumers, and the economy.
JMH – 4/6/11
 Barry C. Lynn, Cornered:The New Monompoly Capitalism and the Economics of Destrution, John Wiley & Sons, 2010, p. 13.
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