Texas Instruments To Buy National Semiconductor

Texas Instruments plans to acquire rival National Semiconductor for $6.5 billion in cash, making TI the third largest semiconductor maker in the world and broadening its leadership in the global market for analog chips.

Under the deal announced Monday, TI will pay $25 a share for National stock. The transaction, which has been approved by each company's board, is expected to close in six to nine months, pending regulatory approval.

TI makes 30,000 analog products used in medical devices, telecommunication, and industrial equipment. The chips are also used in mobile phones to amplify radio signals and to manage power consumption in PCs. Buying National will add 12,000 analog products to TI's portfolio.

The acquisition will make TI the world's third largest semiconductor maker with $14.5 billion in revenue, surpassing Toshiba, which would fall to fourth place, according research firm IHS iSuppli. As of the end of 2010, Toshiba had $13 billion in revenue. TI is the world's largest analog chipmaker, accounting for 13.7% of the market, or $6.4 billion. With the National buy, TI's share will rise to 16.8%, iSuppli says. Rivals in the analog market include Analog Devices, Linear Technology, and STMicroelectronics.

"This acquisition is about strength and growth," Rich Templeton, TI's chairman and chief executive of TI, 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."

Under TI, National's portfolio will be sold by a sales force that is larger by tenfold. "TI has much greater scale in the marketplace, with its larger portfolio of products and its large global sales force," National chief executive Don Macleod said in a joint statement with Templeton. "This provides a platform to enhance National's strong and highly profitable analog capability, power management in particular, leading to meaningful growth."

National's analog chips for power management were likely very attractive to TI. In 2010, the market for voltage regulators expanded 36.3% to $9.1 billion, compared to the 32.1% year-to-year increase for the semiconductor market as a whole, according to iSuppli.

Another key benefit for TI is National's chip factories, called fabs, which are located in Maine, Scotland, and Malaysia. TI plans to continue operating the facilities, each of which has additional capacity to increase production, the companies say.