Intel Reportedly May Try Hostile Takeover of Altera

An agreement signed between the two companies earlier this year could open the door to another attempt by Intel to acquire fellow chip maker Altera.

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Intel may be in position to launch a hostile takeover of chip maker Altera after June 1, continuing its pursuit of a deal that went off the rails earlier this month when the two sides couldn't agree on a price.

According to unnamed sources talking with Reuters, Intel signed a standstill agreement with Altera earlier this year, a move that included the option for Intel to push for a hostile takeover of the programmable chip maker after June 1 if an agreement couldn't be reached before then.

News of the agreement comes three weeks after Altera officials reportedly turned down an unsolicited $54-per-share offer from Intel, a price that would put the total offer at about $10.4 billion. It would represent the Intel's largest acquisition since buying security software maker McAfee in 2011 for almost $7.7 billion.

Intel officials in February, looking at publicly available information about Altera, initially talked about a price of $58 per share, the sources told Reuters. However, Intel later signed a non-disclosure agreement and started going through Altera's non-public information—including its outlook—before deciding to lower the offer to $54 a share.

Neither Intel nor Altera officials were commenting on the report. According to the sources, Altera officials agreed to negotiate with Intel during the winter on the condition that Intel would not publicly talk about an offer for the company until June.

When reports began circulating about the negotiations breaking down several weeks ago, speculation turned to whether Intel would start looking at other acquisitions in its efforts to bolster its mobile chip capabilities, with some analysts saying Broadcom could be a target.

However, at least one analyst was skeptical that the Altera deal was done. Patrick Moorhead, principal analyst with Moor Insights and Strategy, told eWEEK at the time that the deal made sense for Intel, and questioned whether it was a negotiating ploy by Altera's board of directors to drive up the price.

"I don't know if this is over or not," Moorhead said. "I'm not convinced the deal is over. This could be the second or third wave of discussions."

According to Reuters, investment firm TIG Advisors, an Altera shareholder, on April 27 opposed a nomination to Altera's board to protest the company's decision not to negotiate with Intel about an acquisition.

Intel is the dominant chip supplier for PCs and servers. However, the company is looking to extend its reach into faster growing markets like mobile devices—such as tablets and smartphones—and the Internet of things (IoT) and wearable technology. Altera makes field-programmable gate arrays (FPGAs), processors that can be programmed through software and are becoming increasingly popular as accelerators that improve system performance while keeping power consumption down.

Intel and Altera already work together. In 2013, Intel announced it would start manufacturing Altera's ARM-based quad-core Stratix 10 processors. A year later, the company extended the partnership to include multi-die devices, integrating Altera's FPGAs and systems-on-a-chip (SoCs) with other components—from memory to application-specific ICs to processors—into a single package.

Altera had a difficult first quarter, generating $435.5 million in revenue—a 6 percent fall from the same period in 2014—and $94.9 million in income, a decline from the $116.5 million year-over-year.

"While we had anticipated a weak start to the year, the first quarter was more challenging than expected," John Daane, Altera's president, CEO and chairman, said in a statement last week.