Intel to walk away from $5.4 bln acquisition of Tower Semiconductor -sources (updated)

Tower Semiconductor

16/08/2023 04:14

(Adds background on the deal, U.S.-China tensions and Tower
shares in paragraphs 4-11)
    By Anirban Sen
       NEW YORK, Aug 15 (Reuters) - Intel Corp  INTC.O  will
walk away from its $5.4 billion deal to acquire Israeli contract
chipmaker Tower Semiconductor Ltd  TSEM.TA  once the companies'
contract expires later on Tuesday, according to people familiar
with the matter.
    Intel, which signed the deal to buy Tower in February 2022,
did not secure approval from Chinese regulators for the
acquisition as required under its contract with the Israeli
firm, the sources said.
    It does not plan to negotiate an extension of the contract,
and will instead pay Tower a $353 million break-up fee to walk
away, the sources added, requesting anonymity ahead of an
official announcement.
    Intel and Tower declined to comment. Representatives for the
State Administration for Market Regulation, China's antitrust
regulator, could not be immediately reached for comment.
    The development underscores how tensions between the United
States and China over issues including trade, intellectual
property and the future of Taiwan are spilling over into
corporate dealmaking, especially when it comes to technology
companies.
    Last year, DuPont De Nemours Inc  DD.N  scrapped its $5.2
billion deal to buy electronics materials maker Rogers Corp
 ROG.N  after delays in securing approval from Chinese
regulators.
    Intel Chief Executive Pat Gelsinger had said he was trying
to get the Tower deal approved by Chinese regulators and had
visited the country as recently as last month to meet with
government officials.
    But Gelsinger also said Intel was investing in its foundry
business, which makes chips for other companies, irrespective of
the Tower deal. 
    In June, Israeli Prime Minister Benjamin Netanyahu announced
that Intel had agreed to spend $25 billion on a new factory in
Israel, the largest-ever international investment in the
country.
    Investors had given up hope on the Tower deal as a result.
Tower's Nasdaq-listed shares ended trading at $33.78 on Tuesday,
a steep discount to the $53 per share deal price.
    In the second quarter, Intel's foundry business reported
revenue of $232 million, up from $57 million a year earlier, as
it made advances on rivals such as industry leader Taiwan
Semiconductor Manufacturing Co  2330.TW .

 (Reporting by Anirban Sen in New York; Additional reporting by
Max Cherney in San Francisco; Editing by Jamie Freed)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
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