TI Makes $65 Billion Bid for National Semiconductor

A combined Texas Instruments-National Semiconductor would create the world's third largest semiconductor manufacturer and expand TI's dominance of the analog chips space.

Texas Instruments is looking to become the world's third largest semiconductor manufacturer with its $6.5 billion bid for National Semiconductor.

If approved by regulators, the deal would give a combined TI-National Semiconductor $14.5 billion in revenues, pushing Toshiba-with its $13 billion-into fourth place, according to the analysts at IHS iSuppli. It also would bolster TI's leadership in the space for global analog integrated circuits. TI currently owns 13.7 percent of the market; with National Semiconductor under its belt, that figure would jump to 16.8 percent, with revenues of about $7.8 billion.

In an April 4 conference call with investors, analysts and journalists, Rich Templeton, chairman, president and CEO of TI, said the proposed deal is about rapidly expanding the business and adding to the company's product portfolio by buying a company with complementary offerings and little overlap.

"With this [deal], we add 12,000 products all at once," Templeton said, noting that TI currently has about 30,000 analog products.

Analog chips take signals such as sound and light and make them into digital signals. Though the trend is toward analog chips being replaced by digital ones, it's still a healthy market, at about $42 billion, according to TI. Showing the complementary nature of the proposed acquisition, Templeton said TI will be able to join its strength in such areas as computer and communications systems-such as mobile phones-with National Semiconductor's growing expertise in the industrial sector. About 45 percent of National Semiconductor's revenues in 2010 came from the industrial space, he said.

According to Templeton, the key reasons for the deal is that it will give TI access to a new customer base, it will accelerate the growth of both TI and National Semiconductor, and "the numbers work for both companies," with ROI (return on investment) within a few years.

"More products will get to more customers after this deal than either [company] could have done on their own," he said.

The deal also will grow National Semiconductor's sales force to more than 10 times what it currently has, Templeton said.

Don Macleod, chairman and CEO of National Semiconductor, said he wasn't looking to sell the company, but that TI executives approached him. He reiterated Templeton's contention that there is little product overlap between the two companies, and that the deal will work because of the complementary nature of the portfolios.

Macleod pointed to some new areas that National Semiconductor is moving into, such as LEDs, solar and electric vehicle battery maintenance, and said combining with a company like TI will only accelerate such efforts.

In response to a question from an analyst, Templeton said he doesn't expect to have problems getting regulatory approvals for the deal. TI officials expect the deal to close in six to nine months.