Intel seals $17 billion deal to buy Altera

The deal will see Intel acquire one of its own customers

Intel Corp. CEO Brian Krzanich (GETTY IMAGES)

The microchip giant Intel has agreed to buy its smaller rival Altera in a bid worth $16.7bn (£11bn) in the latest wave of consolidation in the industry.

Altera shareholders will receive $54 per share in cash from Intel, whose pursuit of its smaller rival has been an open secret since the end of March. Altera is understood to have rejected a similar offer from Intel in April.

The deal will see Intel acquire one of its own customers. Altera designs chips but outsources their manufacture – primarily, although not exclusively, to Intel. Altera’s chips are programmable by customers after purchase and are used widely in cloud computing and smart technology products such as cars and electronic equipment.

The acquisition, which is still to be formally agreed upon by shareholders, will give Intel access to Altera’s range of chips, known as field programmable gate arrays. It will also serve to fend off competition for the lucrative server market from the likes of IBM and the UK’s Arm Holdings.

This is the second major acquisition in the semiconductor market in the last week – on Thursday, Avago Technologies agreed to pay $37bn for Broadcom, a record in the semiconductor industry. Intel will pay for Altera, which posted pre-tax profits of $1.9bn in 2014, using a combination of cash and debt. The boards of both companies have agreed to the terms.