Silicon maker Altera has broken off talks about a potential acquisition by chipset giant Intel, according to multiple reports, apparently after a disagreement over the price.
According to CNBC, the Wall Street Journal, Bloomberg and Reuters, which all cited unnamed sources familiar with the matter, it's unclear whether the talks might resume. Bloomberg said that Altera rejected an offer of around $54 per share while CNBC and the WSJ said the offer was in the low-$50 range. Altera's shares closed up 3.2 percent at $43.33 yesterday and were trading a little bit above that in late-morning trading.
Intel and Altera declined to comment on the talks or reports, according to Bloomberg.
The Journal reported that the talks might pick up again and could lead to deal, but noted that the fact that Altera's stock rose on news that the discussion had ended may decrease pressure on Altera's management to continue the negotiations.
At the same time, financial analysts said that if Altera doesn't make a deal, the company could face pressure to boost its share price. "What are they thinking?" Northland Securities analyst Gus Richard told Bloomberg, referring to Altera. "They're going to come under a huge amount of pressure to take that offer. Earnings aren't going to be that great."
"If in fact management did turn down a $50+ offer, investors will want to know what kind of plans management has to achieve a $50+ stock price in the next number of years," RBC Capital Markets Doug Freedman, wrote in a research note, according to the WSJ.
News of the talks was first reported in late March and those reports said a deal might top more than $10 billion. Altera makes specialized chips that are widely used in cellular base stations, so the deal was seen as a way for Intel to get a tighter grip of the wireless market and strengthen its hand in server chips while it is trying to get its silicon into more mobile devices.
Altera, along with rival Xilinx, is one of the two biggest suppliers of so-called field-programmable gate arrays, or FPGAs, which can be used in a wide variety of devices and applications. FPGAs are widely used in base stations, computer networking gear equipment, cars and other products. After they are manufactured, the FPGA chips can be programmed to carry out specialized tasks like data encryption and work much faster than traditional microprocessors.
Further, Altera's revenue grew faster than Intel's in 2014, jumping up 12 percent to $1.93 billion last year while Intel's increased 6.1 percent to $55.9 billion, according to the Journal.
- see this CNBC article
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
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