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Intel cancels $5.4 billion chip transaction due to lack of regulatory approval

Intel has decided to withdraw from a significant acquisition of an Israeli chipmaker due to its inability to secure the necessary regulatory approval.

In a statement released on Wednesday, the US technology corporation announced its decision to cancel the previously proposed acquisition of Tower Semiconductor (TSEM) valued at $5.4 billion. The company cited the lack of timely regulatory approval as the reason for this action. The announcement of the deal was initially made in February of 2022.

Although Intel (INTC) did not explicitly disclose the jurisdiction it was awaiting approval from, it has previously articulated its endeavors to obtain clearance for the transaction from Chinese regulatory bodies.

In April, the Chief Executive Officer, Pat Gelsinger, acknowledged the tough nature of the process and disclosed his efforts to advance the situation by personally visiting China.

During an earnings call, Gelsinger informed analysts that the Tower acquisition was being diligently pursued as a significant aspect of their recent visit to China.

It was anticipated that the agreement would be finalized within a period of 12 months.

According to the Financial Times, two undisclosed sources have revealed that the agreement, which was initially announced 18 months ago, is still pending approval from China’s antitrust commission.

Both Intel and the State Administration of Market Regulation in China did not provide fast responses to requests for comment.

According to legal counsel providing guidance to multinational corporations, companies seeking to engage in mergers are required to seek approval from Chinese regulatory authorities if their revenue generated from the country exceeds a particular threshold.

The relationship between China and the United States, as well as certain European and Asian allies, has experienced a significant increase in tension due to the issue of semiconductors. This escalation occurred following the implementation of restrictions by US President Joe Biden in October of last year, which aimed to limit Beijing’s access to this crucial technology.

According to the statements issued by both Intel and Tower, the cancellation of the deal was a result of mutual agreement.

According to the statement provided by the California-based corporation, Intel has agreed to pay Tower a termination fee of $353 million in order to disengage from the current arrangement.

The statement resulted in a 3.6% decline in Intel shares in New York on Wednesday, while Tower’s stock listed on Nasdaq also experienced a significant drop of 10.7%.

According to Gelsinger, although the merger between the two enterprises is not feasible, they will persist in seeking potential collaborations in the future.

According to the individual’s statement, Intel expressed the ongoing significance of its investments in foundries, which are manufacturing facilities responsible for producing chips on behalf of external entities, as an integral component of its broader manufacturing strategy.

Gelsinger further emphasized that our admiration for Tower has significantly increased as a result of this undertaking.

According to Russell Ellwanger, the CEO of Tower Semiconductor, the company’s enthusiasm in partnering with Intel was met by the decision to terminate the agreement due to a lack of communication over the necessary regulatory approval, following extensive deliberations.

The speaker expressed gratitude for the endeavors made by all involved parties.

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