Texas Instruments and National Semiconductor on Monday 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 analog semiconductors, each with unique strengths in delivering products to improve performance and efficiency and convert real-world signals in electronic systems. 

Each company has unique strengths.  Among them are the breadth of TI's 30 000 analog products, extensive customer reach, and industry-leading manufacturing including the world's first 300mm analog factory.  National brings a portfolio of 12 000 analog 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 analog segment, and sales of analog semiconductors will represent almost 50% of TI's revenue.

"This acquisition is about strength and growth. National has an excellent development team, and its products combined with our own can offer customers an analog 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," said Rich Templeton, TI's chairman, president and chief executive officer.

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.

It is necessary to note that product portfolios of National Semiconductor and Texas Instruments overlap, which means certain degree of confusion among customers as well as cannibalization of product combined portfolio by products that compete against each other.

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 boards of directors of both companies have unanimously approved the transaction. The transaction is expected to close in six to nine months.

The market for analog semiconductors was $42 billion in 2010. TI is the market leader with 2010 analog revenue of $6.0 billion, or 14% of the market.  National's revenue in calendar year 2010 was about $1.6 billion, or 3% of the market.

Tags: Texas Instruments, National Semiconductor