SANTA CLARA, Calif. & NEW YORK - Intel Corporation (NASDAQ: NASDAQ:INTC) and investment firm Apollo (NYSE: APO) announced on Tuesday an agreement in which Apollo-managed funds will invest $11 billion to acquire a 49% stake in a joint venture with Intel's Fab 34, a semiconductor manufacturing facility in Leixlip, Ireland.
The partnership is part of Intel’s Semiconductor Co-Investment Program (SCIP), designed to provide financial flexibility and support the company's strategic investments globally while maintaining a robust balance sheet. The deal enables Intel to unlock capital from its $18.4 billion investment in Fab 34 and reallocate it to other business areas.
Fab 34 is a high-volume manufacturing site that uses Intel 4 and Intel 3 process technologies. Intel will continue to own and operate the facility, retaining a 51% majority stake in the joint venture. The arrangement also ensures that the joint venture will produce wafers for Intel's products and its foundry customers.
Intel's Chief Financial Officer, David Zinsner, stated that the transaction with Apollo will help Intel execute its strategy amid the anticipated doubling of the global semiconductor market over the next five years. Apollo Partner Jamshid Ehsani expressed enthusiasm for the joint venture, highlighting Apollo's role in providing scaled capital solutions to support infrastructure and technological advancements, including AI technology.
The joint venture is set to manufacture wafers for Intel on a cost-plus-margin basis, with Intel committed to completing the facility's build-out and purchasing a minimum volume of wafers. Financially, Intel plans to consolidate the joint venture's results through net income and account for the non-controlling interest's income in its financial statements.
The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions. Intel has stated that following this SCIP agreement, it does not foresee further SCIP transactions in the near term.
Intel's Fab 34 began manufacturing Intel® Core™ Ultra processors using Intel 4 technology in September 2023 and is ramping up production of its next-generation data center product on Intel 3 technology. The agreement with Apollo is exclusive to Fab 34 and does not involve Intel's other Leixlip facility, Fab 24.
Goldman Sachs (NYSE:GS) & Co. served as Intel's lead financial advisor, with legal counsel provided by Skadden, Arps, Slate, Meagher & Flom LLP and Eversheds Sutherland. Apollo's legal counsel was Paul, Weiss, Rifkind, Wharton & Garrison LLP, with Latham & Watkins LLP advising Apollo co-investors.
This news is based on a press release statement.
InvestingPro Insights
In light of Intel Corporation's recent strategic moves, including the joint venture with Apollo-managed funds, investors may find the following InvestingPro data and tips insightful:
Intel's market capitalization stands at $127.88 billion, reflecting its significant presence in the semiconductor industry. Despite some analysts revising their earnings expectations downward for the upcoming period, the company trades at a low P/E ratio relative to near-term earnings growth, with a current P/E ratio of 31.17 and an adjusted P/E ratio for the last twelve months as of Q1 2024 at 30.45. This could suggest that the stock is undervalued based on its earnings potential.
An interesting metric for investors to consider is Intel’s dividend yield, which is currently 1.65%. This is particularly notable as Intel has maintained dividend payments for 33 consecutive years, demonstrating a commitment to returning value to shareholders.
Regarding stock performance, Intel has been trading near its 52-week low, and the price has seen a significant drop over the last three months, with a 33.32% total return decline in that period. This could present a buying opportunity for investors who believe in the company's long-term prospects and may be looking for an entry point into the stock.
For those looking to delve deeper into Intel's financial health and future outlook, there are additional InvestingPro Tips available at https://www.investing.com/pro/INTC. These tips include insights on Intel's position as a prominent player in the Semiconductors & Semiconductor Equipment industry and the company's performance metrics over various time frames.
With the use of coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable insights. There are 9 additional tips listed in InvestingPro that could help investors make more informed decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.