In early 2022, Intel Corp. announced that it was acquiring Israeli chipmaker Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE:TSEM) in a deal due to be completed by February 2023 but meanwhile delayed while awaiting approval from the Chinese regulator. Intel and Tower expect the deal to be completed by August 2023, and meanwhile Tower continues to publish financial reports as a publicly traded company but unlike in the past it does not conduct conference calls with analysts after the results and dopes not issue guidance.
This week the company published its results for the first quarter of 2023, which were better than market expectations. The share price rose 1.5% on Nasdaq. The share price today is $41, while the share price at which the Intel acquisition is to be completed is significantly higher at $53, in other words a 23% premium on today's price.
The gap reflects investor concerns that the deal will not ultimately be completed despite the desire of both companies. Tower currently has a market cap of $4.6 billion compared with the $5.4 billion (not including the company's cash) at which the deal with Intel will be completed.
Bank Hapoalim believes that the deal will eventually be completed but thinks that "Shareholders will not be damaged in the medium to long term even if the deal is not done although non-completion of the deal in the current market conditions might result in a fall in the share price in the short term."
Bank Hapoalim analyst Shay Zigelman believes there vis a higher chance of the deal being completed than it not being completed, with the scenario of the deal being completed offering a potential upside of 30% in value by mid-August.
In the first quarter of 2023, Tower reported revenue of $356 million, down 16% from the first quarter of 2022. But net profit grew 46% to $81.4 million. At the end of the quarter Tower had $946 million is cash.
Published by Globes, Israel business news - en.globes.co.il - on May 16, 2023.
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