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Top 5 semiconductor M&As of 2015

Posted: 14 Dec 2015 ?? ?Print Version ?Bookmark and Share

Keywords:M&As? mergers? acquisitions? synergy? consolidation?

3. Intel-Altera

Intel will buy Altera for $16.7 billion, making it the former's largest purchase to date.

As part of the merger, Altera will become an Intel business unit that will facilitate continuity of existing and new customer sales and support. The latter will also continue to support and develop Altera's ARM-based and power management product lines.

Intel plans to hit a 7 per cent compound annual growth rate with the merger, but some analysts are questioning how the x86 giant could achieve this. In an EE Times report, Rick Merritt noted one market analyst who said privately that the math of the deal's financials "doesn't make sense to me." Another one suggested Intel might have fared better by using the same money to buy back its own stock.

"We view the acquisition of Altera as a good strategic asset for Intel, albeit at a very high price," said Ross Seymore, analyst for Deutsche Bank. "By our math, the deal appears [about] 3 per cent accretive in 2016... The accretion is meaningfully less than if Intel had used the same amount to repurchase its shares."

2. Avago-Broadcom

Avago bid to buy Broadcom for $37 billion. Should the consolidation push through, there would be little product overlap, a few areas of synergy and a lot of savings in spin-outs and downsizing.

Ironically, Avago is the smaller of the two companies at about $4.3 billion in revenues in its last fiscal year, making it the 14th largest semiconductor company in the rankings of IC Insights. By comparison, Broadcom reported $8.4 billion in revenue in its last fiscal year and is ranked the ninth largest chip company.

A combined company would have nearly $13 billion in revenues, edging it up to about seventh place, ahead of Texas Instruments and below Qualcomm at $19 billion.

Avago and Broadcom have little overlap although both have products that target broad consumer and commercial markets. Avago is strong in analogue products related to optical and wireless communications; Broadcom is more focused on digital SoCs for smart home and data centre markets.

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