$3 Billion Buyout Rumors Grip Intersil Corp. (NASDAQ: ISIL)

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Intersil Corp. (NASDAQ: ISIL) and Japan’s Renesas Electronics have been in talks that could see the two companies combine, but none of them has been willing to discuss the potential transaction publicly.  However, a person with insider knowledge has leaked information that Intersil and Renesas are close to announcing a $3 billion merger deal.

$3 billion in favor of ISIL

It has been revealed that Intersil Corp. (NASDAQ: ISIL) is willing to sell itself to Renesas for $3 billion. The companies are said to be in the final stage of the merger negotiation.

The $3 billion Intersil is being offered represents a decent premium to its market cap of about $2.1 billion on Friday.

Investors cheer the merger rumor

Investors in Intersil Corp. (NASDAQ: ISIL) appeared to be impressed by the buyout the company is getting Renesas, thus bidding the stock up immediate the new entered the market.

In search of deals

Rumors that Renesas is seeking to acquire Intersil cannot be far-fetched considering that Renesas’ CFO, Hidetoshi Shibata, had hinted that they were accumulating cash for potential acquisition.

Renesas, the world’s third-largest chipmaker by market share, is trying to defend its market position and one of the ways the management is trying to do that is through acquisition.

Renesas is expected to fund the acquisition of Intersil through cash on hands and loan from banks.

The person who shared the merger talks between Intersil and Renesas said the deal could close as soon as the end of this month.

Industry consolidation

If Renesas does acquire Intersil Corp. (NASDAQ: ISIL) has anticipated, it will continue the trend of consolidation in the global semiconductor industry. You can remember that NXP Semiconductors NV (NASDAQ: NXPI) displaced Renesas as the world’s second-largest chipmaker after it acquired Freescale Semiconductor for $12 billion.

Though acquisition of Intersil might not see Renesas regain its second-place spot, it hopes to defend the market share that it already control, which is estimated by Gartner to be 9.1%.

2Q2016 results – Intersil Corp. (NASDAQ: ISIL)

In its 2Q2016, Intersil Corp. (NASDAQ: ISIL) posted EPS of $0.17 on revenue of $134 million. Revenue rose 3.7% sequentially and 1.2% YoY. The company declared quarterly dividend of $0.12 per share that it planned to distribute on August 26.

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