Intel Agrees To Buy Altera for $16.7 Billion

Intel Corp has agreed to buy Altera Corp for $16.7 billion. The company made this move, as the world's biggest chipmaker seeks to make up for slowing demand from the PC industry by expanding its line-up of higher-margin chips used in data centers.

Merging with Altera Corporation will allow Intel to bundle its processing chips with the smaller company's programmable chips, which are used, among other things, to speed up Web-searches.

Intel said in a statement on Monday that it would offer $54 per share for san Jose, California-based Altera, a 10.5 % premium to Altera's close on Friday.

It was found that share of Altera were at $51.78, quite below the offer price, in the afternoon trading.

Drop in the share price of Altera suggest that some investors felt that the deal with Intel could face regulatory hurdles, but analysts said that there was practically no overlap of products between the companies.

Shares of Intel were almost 1.7% down at $33.86.

Stifel, Nicolaus & Co analyst Kevin Cassidy said, "It seems very high to me. The last one I remember that was close was Broadcom buying NetLogic at eight time forward revenues, and that didn't turn out very well for Broadcom".

Chief Financial Officer Stacy Smith told Reuters that the integration of Altera's chips with Intel will help in creation of a new class of products that will give its customers a significant improvement in performance.

He further stated that it will also help to lower the cost and will provide a lot more flexibility to new class of products.

This transaction is the third big transaction in the highly fragmented chip industry finalized this year. Earlier, the Avago Technologies Ltd agreed last week to buy Broadcom Corp for $37 billion making it the biggest-ever deal.