Texas Instruments to Buy National Semiconductor for $6.5 Billion

Texas Instruments said on Monday afternoon that it had agreed to acquire National Semiconductor for $6.5 billion in cash.

The deal would combine two leaders in analog semiconductors, a $42 billion market last year. Analog chips process continuous signals, as opposed to 1’s and 0’s, and are used in thousands of products, many of them digital, from cameras to medical products.

Under terms of the agreement, National stockholders will receive $25 in cash for each share, a premium of 78 percent to National Semiconductor’s closing stock price on Monday. The deal values National Semiconductor at nearly 10.6 times earnings before interest, taxes, depreciation and amortization, a high multiple compared with many of its rivals.

“This acquisition is about strength and growth,” said Rich Templeton, the Texas Instruments chief executive, said in a statement. “National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth.”

“The combined sales team will be 10 times larger than National’s is today,” he added, “and the portfolio will be exposed to more customers in more markets.”

Texas Instruments said its plans to use cash on its books and debt to finance the acquisition. Texas Instruments has more than $3 billion in cash, according to Capital IQ. Morgan Stanley is providing $2.5 billion in financing.

The deal is the largest for Texas Instruments since 2000, when it acquired Burr-Brown, another analog chip maker, for $7.6 billion in stock.

And at a time when merger activity is on the upswing, the deal for National Semiconductor is one of the biggest technology acquisitions in the last 12 months, dwarfed only by Intel’s $7.7 billion purchase of McAfee in August.

The deal would be the fifth-biggest semiconductor acquisition since 2000, according to Thomson Reuters data.

The merger agreement has a $350 million break-up fee, according to a regulatory filing.

Morgan Stanley and the law firm of Jones Day advised Texas Instruments. Qatalyst Partners — Frank Quattrone’s firm — and Goldman Sachs advised National Semiconductor. The law firm of Latham & Watkins served as legal counsel to National Semiconductor.

Top U.S. Semiconductor M&A Since 2000

Date	Target	Acquiror	Value ($ millions)
7/10/2000	SDL Inc.	JDS Uniphase	40,992.57
9/15/2006	Freescale Semiconductor	Private equity consortium	17,454.53
1/17/2000	E-Tek Dynamics	JDS Uniphase	15,252.55
6/21/2000	Burr-Brown	Texas Instruments	6,792.22
4/4/2011	National Semiconductor	Texas Instruments	6,502.28
10/7/2003	Freescale Semiconductor	Shareholders	5,045.9
8/27/2000	MMC Networks	Applied Micro Circuits	4,424.23
12/4/2006	Agere Systems	LSI Logic	3,779.61
1/15/2009	Spansion	Creditors	3,270.3
6/4/2007	Solectron	Flextronics International	3,153.35