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TI acquires National Semiconductor for $6.5bn

Analog chips ahoy!

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Texas Instruments has agreed to purchase rival National Semiconductor for $6.5 billion, a deal would combine two of the world's largest chip makers.

TI said the pact would expand its portfolio of analog chips, processors that create a bridge between the worlds of analog and digital. Whereas digital chips can only handle 1s and 0s, analog chips can read and process varying signals, such as speech and music and old school video.

Such chips are used in everything from cameras and phones to industrial equipment. According to TI, a combined company would offer 42,000 analog-chip products, and sales of those products would provide about half of TI's overall revenue.

"This acquisition is about strength and growth," reads a canned statement from TI chairman, president, and chief executive officer Rich Templeton. "National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth."

According to Templeton, by acquiring National Semiconductor, TI would significantly accelerate its rival's growth, thanks to a combined sales force that's 10 times the size of what Nat Semi has today. "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," he said.

"Our ability to accelerate National's growth with our much larger sales force is the foundation of our belief that we can produce strong returns on our investment."

TI also said that it would benefit from the existing Nat Semi manufacturing operations located in Maine, Scotland, and Malaysia, adding that each site had room for increased production. Following the acquisition, National Semiconductor's headquarters will remain in Santa Clara, California, about an hour's drive from San Francisco. The deal is expected to close in six to nine months.

According to TI, the analog semiconductor business is a $42bn market, with TI controlled about 14 per cent, or $6bn. Nat Semi, it said, controls about three per cent, or $1.6bn.

TI has agreed to pay stockholders $25 per share of Nat Semi common stock they hold at the time the deal closes. It intends to fund the deal through cash balances and debt. ®

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