Due of regulatory obstacles, Intel and Tower Semiconductor cancel their USD5.4 billion deal

Due to difficulties getting necessary regulatory permissions in a timely manner, Intel and Tower Semiconductor have mutually agreed to end their planned $5.4 billion transaction. According to their joint release, the firms’ failure to get the required regulatory permissions was the cause of the termination.

A statement from the parties involved states that Intel will pay Tower Semiconductor a termination fee of $353 million. With Intel’s aim to buy Tower Semiconductor, the acquisition strategy had been put into action the previous year. Notably, according to Reuters, there have been no information provided about the causes of the regulatory snag.

 

Reuters was the source of the first news of the deal’s termination. According to the news source, Intel planned to discontinue the agreement after the contract expired since China’s regulatory approval was missing.

 

With the following statement, Tower Semiconductor expressed its viewpoint on the situation: “After careful consideration and thorough discussions, and having received no indications regarding certain required regulatory approval, both parties have agreed to terminate their merger agreement having passed the August 15, 2023 outside date.”

 

Pat Gelsinger, the CEO of Intel, discussed his attempts to get Chinese authorities to approve the Tower purchase. He recently traveled to China to discuss the issue with government representatives. Regardless of the outcome of the Tower acquisition, Gelsinger highlighted that Intel is still dedicated to improving its foundry business, which is in charge of making chips for other companies.

 

This incident demonstrates how geopolitical tensions between the United States and China have affected business dealings, notably in the technology industry. These conflicts include trade, intellectual property, and geopolitical issues like Taiwan’s destiny.

 

A similar situation occurred last year when DuPont De Nemours Inc. canceled its $5.2 billion offer to buy Rogers Corp., a maker of electronics materials, as a result of delays in receiving clearance from Chinese regulatory organizations.

 

Israeli Prime Minister Benjamin Netanyahu announced Intel’s decision to spend $25 billion in a new facility in Israel in June of this year. The country’s greatest documented foreign investment is represented by this action. The complex will employ thousands of people in Kiryat Gat beginning in 2027 and running until at least 2035. According to the Israeli Finance Ministry, the deal requires Intel to pay 7.5 percent tax, up from the existing 5 percent rate.

 

Intel’s foundry division performed well during the second quarter, garnering $232 million in sales as opposed to $57 million the year before. This achievement may be ascribed to “advanced packaging,” a process that allows Intel to include parts from rival chip producers, leading to stronger processors. After a two-year spike fueled by pandemic-induced remote work, Intel’s chip demand has leveled out, forcing the corporation to concentrate on cost cutting. The corporation wants to save between $8 billion and $10 billion overall by the end of 2025. The current year’s cost reduction target is $3 billion.