What happened
Tower Semiconductor(NASDAQ: TSEM) stock is losing ground in Wednesday's trading. The chip specialist's share price was down 7.5% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence.
Tower Semiconductor was on track to be acquired to be acquired by Intel (NASDAQ: INTC) in a $5.4 billion deal, but the larger chip company announced today that it's canceling the buyout attempt. Intel was not able to receive approval on the acquisition from Chinese regulators.
So what
Tower Semiconductor is an Israel-based semiconductor foundry company that specializes in the fabrication of analog integrated circuits. Intel has been aiming to ramp up its fabrication capabilities, and acquiring Tower looked to be sensible move for the chip giant, but the deal was never able to get the blessing of Chinese antitrust regulators.
At a buyout price of $5.4 billion, Intel had been on track to buy Tower at a price of $53 per share -- representing a premium of roughly 57% compared to yesterday's closing price of $33.78 per share. While today's sell-off represents a substantial pullback, it also shows that investors were already somewhat cautious about the buyout's chances of being completed.
Now what
With the buyout no longer on the horizon, Tower Semiconductor shareholders have lost an opportunity for some substantial near-term gains. But it's not all bad news for Tower shareholders. As a result of walking away from the deal, Intel will pay the fab specialist a termination fee of $353 million.
The fact that Intel was willing to acquire the company at a significant premium shows that the larger semiconductor company saw significant value in Tower. On the heels of the recent stock pullback, investors may want to consider building a position in the stock through dollar-cost averaging.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tower Semiconductor. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.
