Intel cancels a $5.4 billion chip deal due to a lack of regulatory approval

Intel cancels a $5.4 billion chip deal due to a lack of regulatory approval

After failing to secure the necessary regulatory approval, Intel withdrew from a significant acquisition of an Israeli chipmaker.

The US IT giant announced in a statement on Wednesday that it would abandon its proposed $5.4 billion acquisition of Tower Semiconductor (TSEM), claiming it was late in receiving the required regulatory approval. The agreement was initially disclosed in February 2022. Although Intel (INTC) did not specify whose jurisdiction it was awaiting, it has previously described efforts to get the merger approved with Chinese authorities.

CEO Pat Gelsinger acknowledged that the procedure had been difficult in April and mentioned that he had been to China to try to advance things.

On an earnings call, Gelsinger stated, “We continue to work diligently to complete the Tower acquisition as part of my recent trip to China.

The Financial Times reported on Wednesday, citing two unnamed sources, that the acquisition has still not been approved by China’s antitrust regulator 18 months after it was first announced.

According to law firms that counsel international corporations, businesses that want to merge must submit their proposed deals for approval to Chinese regulators if they generate a particular level of revenue from China.

After US President Joe Biden imposed curbs to limit Beijing’s access to the crucial technology last October, tensions between China and the United States—including some of its allies in Europe and Asia—have increased over semiconductors.

Read about – Dumb phones vs. smartphones: Why people are dumping smartphones

In their respective announcements, Intel and Tower both claimed that the contract had been canceled by mutual consent.

Tower will now get a $353 million termination fee from Intel in exchange for leaving, the California-based business stated in the statement.

Following the news on Wednesday in New York, shares of Tower, which are traded on the Nasdaq, also slumped 10.7%.

Although the two businesses can’t combine, Gelsinger said they will still “look for opportunities to work together in the future.”

He maintained his belief that Intel’s investments in foundries—factories that make chips for other companies—were “critical” to its overall manufacturing strategy, according to the statement.

Russell Ellwanger, CEO of Tower Semiconductor, stated that although his company had been eager to work with Intel, the decision to end the agreement occurred after “thorough discussions and having received no hints about a specific regulatory approval that was necessary.

“We appreciate the efforts made by all stakeholders,” he said.

Explore the homepage for more information, and watch interesting videos by subscribing to our channel.