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Intel, Altera end takeover talks due to price disagreement

April 9, 2015, 9:37 PM UTC
People visit the Intel booth at the 2013 Computex exhibition at the TWTC Nangang exhibition hall in Taipei
People visit the Intel booth at the 2013 Computex exhibition at the TWTC Nangang exhibition hall in Taipei June 4, 2013. Computex, the world's second largest computer show, runs from June 4 to 8. REUTERS/Pichi Chuang (TAIWAN - Tags: SCIENCE TECHNOLOGY BUSINESS SOCIETY) - RTX10AYC
Photograph by Pichi Chuang — Reuters

Discussions on a takeover by Intel (INTC) of smaller chip maker Altera have ended as the companies were unable to agree on price, a person familiar with the matter said, but Altera shares rose, suggesting it is still a potential target.

Altera’s shares closed up 3.2% at $43.33 on the Nasdaq after earlier falling as much as 8%. Intel shares closed down slightly at $31.24 after dropping earlier in the day.

Intel’s offer was in the neighborhood of the low-$50 per share range, CNBC reported earlier on Thursday. That represented a 50% premium to Altera’s price before news of the talks was first reported on March 27.

Intel declined comment. Altera did not immediately respond to requests for comment.

Altera’s apparent refusal to do a deal puts pressure on its board, said RBC Capital Markets analyst Doug Freedman.

“Investors are going to demand some explanations,” he said. “If the board and management can’t show a plan that would create a value at or above what Intel is offering, they are going to have to justify why they are saying no.”

Late last month, Intel was reported to be in talks to buy Altera in a deal that could have topped $10 billion.

Altera had a market capitalization of $12.6 billion as of Wednesday. Its shares had surged more than 20% since merger talks were first reported by the Wall Street Journal.

Had the deal gone through, the takeover would have been Intel’s largest acquisition, topping its $7.7 billion purchase of security software maker McAfee in 2011.

Altera would appeal to Intel for its line of programmable chips, increasingly used in data centers and customized for functions such as providing web-search results or updating social networks.

Deals in the chip sector have been expected after NXP Semiconductors’ $12 billion purchase of Freescale Semiconductor was announced last month.

Worldwide semiconductor mergers and acquisitions were worth $31 billion last year, the most since 2011, Thomson Reuters data shows. In the 12 months through March 2, four hundred seventy-two chip M&A deals were made worldwide, up from 383 in the previous year.

Market analysts said they expect the chip M&A boom to continue despite the end of the Altera-Intel talks.

“Perhaps it impacts those two stocks but I don’t see it offsetting the major trend, which is certainly for more deals,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC.

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