Intel and Tower Semiconductor’s $5.4 billion deal has been mutually terminated due to challenges in securing timely regulatory approvals, the companies announced on Wednesday.
Shares of Tower Semiconductor witnessed a decline of about 9% in both the United States and Tel Aviv markets.
Intel, which had previously committed to acquiring Tower, will pay a termination fee amounting to $353 million, according to a statement released by the company.
No specific details regarding the regulatory approvals were provided by either Tower or Intel according to Reuters.
The termination of this deal reflects the influence of broader geopolitical tensions, particularly those between the United States and China, which are impacting corporate mergers, especially within the technology sector.
This situation draws parallels with last year’s incident where DuPont De Nemours Inc decided to abandon a $5.2 billion deal to purchase electronics materials manufacturer Rogers Corp due to delays in obtaining regulatory approval from Chinese authorities.
Intel’s CEO, Pat Gelsinger, made substantial efforts to gain approval from Chinese regulators for the Tower deal.
However, the inability to secure this approval, coupled with Intel’s focus on bolstering its foundry business, led to the deal’s termination.
In June, Israeli Prime Minister, Benjamin Netanyahu unveiled Intel’s commitment to invest $25 billion in a new manufacturing facility in Israel, marking the largest international investment in the country to date.
Investor sentiment had already shifted away from the Tower deal, reflected in Tower’s Nasdaq-listed shares trading at $33.78 on Tuesday, significantly below the $53 per share deal price.
During the second quarter, Intel’s foundry business achieved a notable revenue increase, reaching $232 million, up from $57 million the previous year.
This growth was attributed to advancements in “advanced packaging,” a process allowing Intel to create more potent chips by combining components from other chipmakers.
Demand for Intel’s chips has tapered off following two years of robust growth driven by pandemic-induced remote work.
As a result, Intel has embarked on cost-cutting measures, targeting a $3 billion reduction in costs this year and aiming for a total saving of $8 billion to $10 billion by the end of 2025.