The stock price of Tower Semiconductor Ltd (TSEM) skyrocketed late Monday following news that Intel Corp was nearing a deal to acquire the Israeli chip manufacturer for $6 billion. U.S.-traded shares of the chipmaker jumped by nearly 50% in the extended session Monday.
The news came after the markets closed, indicating that Intel was already finalizing the deal that would significantly expand its chip manufacturing operations. A report published by the Wall Street Journal, which cited unnamed sources with knowledge in the matter, claimed that the acquisition deal could be announced as early as this week if talks do not fall apart.
TSEM's share price was down 2% before markets closed Monday, ending at $33.13 per share, giving the company a market capitalization of $3.54 billion. In extended trading, TSEM's stock price surged by 48.2%, reaching a peak of $49.10 per share. Intel's share had surged by more than 0.4% following the publication of the news indicating its intention to acquire TSEM.
TSEM manufactures different kinds of microchips used in industrial, automotive, consumer, and electronics applications. The company has manufacturing facilities in Israel, Italy, California, and Texas. TSEM owns a 51% stake in Tower Partners Semiconductor Co Ltd, a Japan-based integrated circuit manufacturing company that ships an estimated 750 million chips to the automotive industry.
TSEM is ranked seventh out of 41 stocks in the semiconductor manufacturing sector group. The IBD Composite Rating for it is 88 out of 99. With an IBD Composite Rating of 60, Intel is ranked No. 22 in the group.
Intel's planned acquisition of TSEM is likely part of its wider plans to expand its manufacturing capacity to meet the growing global chip demand. The company previously announced that it would be investing $29 billion in 2022 to achieve its goals. Intel recently said it would spend an additional $20 billion to build a "mega-site" in Ohio dedicated to manufacturing computer chips. It also unveiled plans to spend another $20 billion for another manufacturing facility in Arizona.
The news of Intel's interest in buying TSEM comes as the company continues its efforts to take on its main rival and current industry leader Taiwan Semiconductor Manufacturing (TSM).
Intel was reportedly said to be interested in buying the then-privately held company GlobalFoundries through a $30 billion deal in July. However, that speculation was put to rest in October when GlobalFoundries filed for an initial public offering and began trading publicly on the Nasdaq.
