Texas Instruments to buy National Semiconductor

Texas Instruments has announced its intention to buy National Semiconductor in an all-cash $6.5bn (£4bn) move that will create a giant in the semiconductor space.

The combination of the two firms will propel Texas Instruments into third place in the semiconductor rankings, overtaking rival Toshiba.

"This acquisition is about strength and growth," said Rich Templeton, chairman, president and chief executive of Texas Instruments.

Templeton added that the deal will benefit both companies, and praised National Semiconductor for its current business.

"National has an excellent development team, and its products combined with our own can offer customers an analogue portfolio of unmatched depth and breadth," he said.

"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."

Analysts at IHS iSuppli said that the companies earned combined revenues of $14.5bn (£8.9bn), which beat Toshiba's $13bn (£8bn) but are dwarfed by Samsung's $27.8bn (£17bn). National Semiconductor is rated 37th in iSuppli's revenue rankings.

The deal is not just about revenues, however, and Texas Instruments will gain a much wider business footprint. IHS iSuppli said that the deal will increase the chip firm's current leadership in analogue integrated circuits to about nine per cent higher than second ranking STMicroelectronics.

Texas Instruments is also likely to benefit from National's voltage regulator business, as that part of the acquisition will give it a quarter share of the entire market.

ISuppli explained that, while semiconductor sales grew by 93 per cent in the past year, the voltage market grew by 169.4 per cent, rising to $9.1bn (£5.6bn) in 2010 and tripling since 2001.

The deal will also boost the manufacturing facilities available to Texas Instruments, allowing the company to extend to plants in Maine, Scotland and Malaysia.

Texas Instruments warned last month of lost revenues in the first and second quarters of 2011 after the Japanese earthquake severely damaged its Miho factory in the country.