Hapoalim: Tower won’t be hurt in long-term if Intel deal canceled

In early 2022, Intel announced that it would acquire the Israeli chipmaker Tower Semiconductor Limited. (NASDAQ: TSEM; level:TSEM) in a deal that was due to be completed by February 2023 but has been delayed in the meantime, pending approval from the Chinese regulator. Intel and Tower expect the deal to be completed by August 2023. Meanwhile, Tower continues to publish financial reports as a publicly traded company, but unlike in the past, it doesn’t hold conference calls with analysts after results and instructions don’t provide guidance.

This week, the company published its results for the first quarter of 2023, which were better than market expectations. The share price rose 1.5% on the Nasdaq. The share price today is $41, while the share price at which the Intel acquisition will take place is much higher at $53, in other words a 23% increase over today’s price.

The gap reflects investors’ concerns that the deal will not be completed in the end, despite the desire of both companies. The tower’s market value is currently $4.6 billion compared to the $5.4 billion (not including company funds) that the deal with Intel would close.

Bank Hapoalim believes that the deal will eventually come to an end, but it believes that “the shareholders will not be harmed in the medium to long term even if the deal is not completed, although the failure to complete the deal in the current market conditions may lead to a decrease in the share price in the short term.”

Shay Ziegelman, an analyst at Bank Hapoalim, believes that there is a greater chance that the deal will be completed than not, as the deal scenario presents a potential upside of 30% in mid-August.

For the first quarter of 2023, Tower reported revenue of $356 million, down 16% from the first quarter of 2022. But net profit grew 46% to $81.4 million. At the end of the quarter, the tower had $946 million in cash.

Published by Globes, Israel business news – en.globes.co.il – on May 16, 2023.

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