Intel Corp. will pay about $15 billion to acquire Mobileye NV which means that they will be paying one of the highest takeover premiums this century to play catch-up in the market for technology that helps cars drive themselves. The popular U.S. chipmaker will pay $63.54 per share in cash for Jerusalem-based Mobileye, which makes chips for cameras and driver-assistance features. The offer, the largest ever for an Israeli company, is a 34 percent premium to Mobileye’s closing price on Friday.
Intel is trying to accelerate a push into what many chip companies view as the next big opportunity: self-driving cars and the data they generate. With Mobileye, Intel gains the ability to offer automakers a larger package of components they will need as vehicles become more autonomous.
Based on transactions over $5 billion and Mobileye’s trailing 12 month earnings, before interest, tax, depreciation and amortization. The deal gives Mobileye an enterprise value of about 29.5 times this year’s projected sales. That’s more than 10 times the average of companies in the U.S which makes this deal the third most expensive acquisition in the technology industry this century
Recently, Mobileye has been pushing to sign up more carmakers for its advanced products, such as technology that collects data from vehicle fleets to build a real-time, crowd-sourced mapping service. Intel will combine its existing autonomous vehicle technology unit with Mobileye and the new group will be run in Israel by Shashua
Shashua is the personification of car safety and autonomous driving. Last year, Musk’s electric carmaker Tesla Inc. stopped using Mobileye’s systems and the two companies argued publicly about the breakup. The Israeli company expressed concerns about the safety of Tesla’s Autopilot hands-free highway driving feature, while Tesla accused the supplier of trying to block its in-house efforts to develop computer vision capabilities for cars.
While Intel’s chips are dominant in personal computers and data centers, the world’s largest semiconductor maker has struggled to spread the use of its products to other areas where semiconductors based on ARM Holdings Plc. designs have prevailed. Under Chief Executive Officer Brian Krzanich, Intel has sought to break into everything from drones to cash registers. That hasn’t fired up Intel’s overall sales growth yet, leaving the company reliant on PCs and servers for its profit.
Mobileye is the second-biggest acquisition for Intel after Altera Corp., which it bought in 2015 for $16.7 billion. As of the end of 2016, Intel held about 80 percent of its $17.1 billion in cash and equivalents overseas. It could use some or all of that to buy Mobileye, a potentially efficient use of cash that would be taxed more if brought back to the U.S. The company had total debt of $25.3 billion at the end of last year.
In the highly competitive market for autonomous cars, Intel’s purchase is a shot at rival Qualcomm Inc. The mobile phone chipmaker is in the process of making itself the world’s biggest producer of chips used by the automotive industry through its $47 billion acquisition of NXP Semiconductors NV.
Carmakers and technology companies are scrambling to stake out a leading market position. Intel’s chips are already in 30 vehicle models currently on the road and are being used in hundreds of autonomous test vehicles. Intel and Mobileye had already teamed up with BMW AG and plan to introduce fully autonomous cars by 2021. The companies are dispatching a fleet of 40 self-driving 7-Series sedans this year to hone systems for complex urban traffic.
Google, which separated its self-driving car project into a new unit called Waymo last year, plans to start a ride-sharing service using semi-autonomous minivans made by Fiat Chrysler Automobiles NV as soon as the end of 2017. Volkswagen AG is rolling out Moia, a new division that will focus on ride-sharing and other mobility services. Mercedes has already offers cars that can pilot themselves at highway speeds. Intel expects to see $175 million a year in cost and tax savings from the transaction and that this will help cover the premium Intel is paying for Mobileye