Texas Instruments to Purchase National Semiconductor

April 4, 2011 Updated: April 4, 2011

SAN FRANCISCO—Chipmaker Texas Instruments (TI) said late Monday that it had reached an agreement to purchase rival National Semiconductor for $6.5 billion in an all-cash deal.

After U.S. markets closed to start the week, Dallas-based TI, famous for its ubiquitous graphing calculators that are a mainstay in high school and college classrooms, agreed to pay $25 a share in the merger, which translates to a whopping 78 percent premium over National Semiconductor’s Monday close of $14.07.

National specializes in making semiconductors using analog components, which is used to convert optical and audio signals into digital formats. Such technology is frequently used in imaging equipment such as cameras and medical imaging devices.

After the merger, TI would become a leader in the industry. The resulting company will carry more than 40,000 analog products and would delegate National Semiconductor to TI’s analog division, which represented nearly half of the Texas Instruments’ revenue last year.

“This acquisition is about strength and growth,” TI President, CEO, and Chairman Rich Templeton said in a joint statement.

“Our ability to accelerate National’s growth with our much larger sales force is the foundation of our belief that we can produce strong returns on our investment. The combined sales team will be 10 times larger than National’s is today, and the portfolio will be exposed to more customers in more markets.”

Texas Instruments and National Semiconductor generated a collective $7.6 billion in analog revenue in 2010, making up 17 percent of the $42 billion analog semiconductor market. TI alone accounted for $6 billion (14 percent market share) in analog revenue.

“Our two companies complement each other very well,” Don Macleod, National Semiconductor’s CEO, added.  “TI has much greater scale in the marketplace, with its larger portfolio of products and its large global sales force.  This provides a platform to enhance National’s strong and highly profitable analog capability, power management in particular, leading to meaningful growth.”

Stock of National Semiconductor Corp. (NYSE:NSM) jumped more than 72 percent in after-hours trading, eclipsing $24, or a more than $10 gain. Texas Instruments (NYSE:TXN) stock edged down 1 percent to $33.76 after finishing the day at $34.11.

The bid for National was unsolicited, but National CEO Don MacLeod told investors on Monday that TI’s offer was too good to pass up.

National Semiconductor will remain headquartered at Santa Clara, Calif. and the company’s manufacturing operations in Scotland, Malaysia, and Maine will stay open.

The deal still requires the approval of regulators and National Semiconductor’s stockholders, and could be complete in six to nine months.