24 March 2017

Intel to snap up Mobileye in multi-billion-dollar deal

Intel is targeting the driverless car sector for its next phase of growth as it estimates the industry to be worth up to USD 70,000 million by 2030. The California-headquartered company, which is facing increasing competition from other chip-makers like Qualcomm, has agreed to acquire Mobileye for about USD 15,300 million. Intel is offering USD 63.54 per share, representing a 34.4 per cent premium to the target’s close on 10th March, the last trading day prior to the deal being announced. If the transaction goes through, it will be the largest among those that target Israeli companies, according to Zephyr, the M&A database published by Bureau van Dijk.

Incorporated under the laws of the Netherlands, Mobileye is a developer of driver assist software that uses motion detection algorithms to prevent car accidents and reduce traffic congestion. By crunching visual data, such as road signs, traffic lanes, pedestrians and other vehicles, its systems alert users to potential danger on the road and also activate brakes to avoid imminent collisions.

With the success of its safety systems, which are now integrated in cars produced by over 25 automakers, including General Motors and Ford, Mobileye is now ambitiously betting on self-driving technology. By teaming up with BMW, Mobileye announced early this year that both companies aim to put fully autonomous cars on the road by 2021 and would launch 40 test vehicles by the second half of 2017.

Mobileye has also enjoyed significant growth in recent years, having posted revenue of USD 358.16 million in 2016, almost nine times its revenue in 2012. It yielded net profit of USD 108.37 million, up significantly from its net loss of USD 53,000 five years ago.

Commenting on the merger with Intel, Mobileye’s chief executive Ziv Aviram said: “By pooling together our infrastructure and resources, we can enhance and accelerate our combined know-how in the areas of mapping, virtual driving, simulators, development tool chains, hardware, data centres and high-performance computing platforms.”  

Some analysts, however, think Intel is overpaying for the deal as the buyer desperately seeks growth, the Economist reported. This follows last year’s decision to sell a 51.0 per cent stake in Intel Security to TPG for around USD 2,142 million, a discount to the USD 7,680 million it spent to purchase the cybersecurity firm in 2011. Nevertheless, the synergy between Mobileye’s technology and Intel’s expertise in chip making and computing will serve to benefit both companies amid the increasingly competitive self-driving vehicle industry, according to the newspaper.  

Recent completed acquisitions by Intel include Altera, a manufacturer of programmable semiconductor integrated circuits. The transaction, which took place in December 2015, was valued at around USD 16,700 million.  

© Zephyr