Is Intel Now Plotting A Hostile Bid For Altera?

Chip giant Intel could reportedly be freed up to launch a hostile takeover bid for chip maker Altera, beginning in early June.

Intel apparently signed a ‘standstill agreement’ with Altera earlier this year according to Reuters, but as of June 1, sources familiar with the matter said that this agreement expires which would free up Intel to launch a hostile bid for the company.

Stalled Negotiations

There has been market speculation for a while now that Intel was in the market to buy Altera for about $10.4bn (£6.8bn), a deal that would have been Intel’s largest since it bought security software maker McAfee in 2011 for about $7.7bn (£5bn).

Last month it was reported that Intel’s negotiation to buy Altera had been terminated after disagreements on the price. Altera officials had apparently rejected Intel’s offers of a per-share price around $54 (£35.31) as being too low. Intel had apparently previously offered $58 based on publicly available information, but after it signed a signed a non-disclosure agreement and examined Altera’s books, it revised its offer down.

Despite the terminated talks between both parties, few observers believed at the time that the deal was truly dead.

This is because Intel is known to be exploring opportunities in other sectors and reduce its reliance on the PC market, after a torrid time in the PC and server space. It is looking to segments such as mobile devices (tablets/smartphones) as well as data centres, the Internet of things (IoT) and wearable technology, as possible future growth markets.

Good Fit

Altera has worked with Intel in the past and is seen as a good fit for the giant chip, as it is the top maker of field-programmable gate arrays (FPGAs).

These FPGAs are essentially software programmable processors, which are becoming increasingly popular as accelerators that can improve system performance while helping keep power consumption down.

But now the Reuters report may explain why Intel did not launch a hostile takeover bid for Altera shares when negotiations broke down between the two management teams.

If the Reuters report is accurate, it could suggest that Intel may take its acquisition proposal directly to Altera shareholders and circumvent Altera’s management team altogether (i.e. a hostile takeover approach).

Both Intel and Altera have so far declined to comment on the Reuters report.

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