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Texas Instruments to Acquire National for $6.5 Billion

Texas Instruments will acquire long-time analog chip rival National Semiconductor in a $6.5 billion deal that will strengthen TI's position in analog semiconductors.

Under the deal, which is expected to close in six months, National shareholders will receive $25 per share. National's stock price closed Monday at $14.07, but the price increased to $24.27 in extended trading after the deal was announced.

"This acquisition is about strength and growth," said Rich Templeton, TI's chairman, president and chief executive officer. "National's products, combined with our own, can offer customers an analog portfolio of unmatched depth and breadth."

"Our two companies complement each other very well," said Don Macleod, National's chief executive officer. "TI has much greater scale in the marketplace, with its larger portfolio of products and its large global sales force."

TI makes about 30,000 analog products while National has a portfolio of about 12,000 products and a strong position with customers in the industrial power market.

Some industry analysts said the products of both companies are not complementary and are in fact very similar. However, in a conference call with analysts to discuss the acquisition, Templeton disagreed, noting that the two companies are focused on different customer segments.

"Last quarter over 45 percent of National's revenue came from industrial applications," Templeton said. "Our analog revenue is weighted towards communications and computing applications. Even within the various categories of analog there is minimal product overlap. "

Templeton noted National has a "rich lineup" of high-voltage power management products for industrial power applications. TI's power management products are "more oriented towards portable devices." National has low-speed, high-resolution data converters, while TI's products are high-speed and high resolution, said Templeton.

Templeton said National has other capabilities that TI lacks.

"They have been investing in a number of new technologies such as automotive power management, general LED lighting and front ends for sensors to name a few that are now poised for growth," Templeton said.

"National's products combined with our own can offer customers an analog portfolio of unmatched depth and breadth," said Rich Templeton, CEO of Texas Instruments.
Templeton added that National has "long been an innovator in packaging technology and we look forward to bringing these capabilities on board."

Brian Matas, an analyst and vice president of research at IC Insights in Scottsdale, Ariz., said there probably are some redundancies in the product lines of the two companies. "However, there are probably more holes that are being filled by this acquisition. TI can now address markets that the company currently is not looking at or not looking at strongly."

Matas added the acquisition strengthens TI's position as the top analog supplier in the industry.

While electronics purchasers don't like consolidation because it means fewer sources of supply, TI's acquisition of National may be beneficial to buyers in one way. TI last year began building some of its analog chips on 300mm wafers and may increase the amount of chips produced on the larger wafers, said Matas. Using 300mm wafers reduces costs by about 30 percent. Buyers who may have been purchasing from National, and now buy from TI, may see lower prices for analog chips produced by TI on 300mm wafers.

Still, with one less analog supplier, buyers "may have to bite the bullet" and qualify another analog supplier "whether it's Analog Devices, ST, or Maxim," said Matas.

National will become part of TI's analog segment, and sales of analog semiconductors will represent almost 50 percent of TI's revenue.

National's manufacturing operations in Maine, Scotland and Malaysia will continue to operate. Each site has additional capacity to increase production. National's headquarters will remain in Santa Clara, California.

The acquisition is subject to review by U.S. and international regulators and approval by National's shareholders.

The market for analog semiconductors was $42 billion in 2010. TI was the market leader with 2010 analog revenue of $6 billion, or 14 percent of the market. National's revenue in calendar year 2010 was about $1.6 billion, or three percent of the market.