They say everything's bigger in Texas, and maybe that includes acquisitions too. How else do you explain Texas Instruments (which is
located in Texas) spending a staggering $6.5 billion acquiring National Semiconductor? That breaks down to $25 per share in what amounts to an all-cash transaction. Here's what TI had to say about the purchase.
"This acquisition is about strength and growth," said Rich Templeton, TI's chairman, president and chief executive officer. "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. 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. The combined sales team will be 10 times larger than National's is today, and the portfolio will be exposed to more customers in more markets."
Fair enough, though at $6.5 billion, it's only natural to wonder if TI is overpaying a bit. As reported in The New York Times
, Citigroup analysts note that the offer values National Semiconductor at a "noticeable premium" of 19.1 times its estimated price/earnings ratio for 2012. Citigroup isn't the only one skeptical of the purchase price.
An analyst with Nomura firmly believes the price is too high, noting that big semiconductor acquisitions "have a terrible track record of generating shareholder value."
On the flip side, TI obviously feels it's making the right move and is stoked to gain a portfolio of 12,000 analog products, a strong position with customers in the industrial power market, and excellent customer design tools as a result of the transaction. There are some analysts who agree with TI and see value in bringing much needed consolidation to a fragmented industry, NYT notes.