Investment firms Silver Lake and Bain Capital are preparing to bid for a minority stake in Altera, Intel’s programmable chip division, which the company intends to turn into an independent enterprise. The sale process is in its early stages, and Intel expects to receive initial proposals from interested parties in the coming weeks. Intel bought Altera in 2015 for $17 billion.
Image Source: Intel
Another possible contender for purchasing a stake in Altera is the investment company Francisco Partners, which has also expressed interest in the deal. A source familiar with the matter said Francisco Partners is likely to participate in the upcoming auction. However, insiders who wished to remain anonymous caution that a deal is not yet guaranteed. Representatives for Silver Lake and Bain Capital declined to comment, and Francisco Partners did not respond to requests for possible participation.
Intel intends to value Altera at $17 billion, although the exact share that it plans to sell has not yet been specified. The deal is likely to cost investors several billion dollars, the sources said. Given Intel’s current difficult financial situation, such a sale could be an important contribution to strengthening the company’s capital and provide it with additional resources for the development of key areas.
At the end of the third quarter of 2024, Altera’s revenue grew by 14% compared to the previous quarter, amounting to $412 million. Intel CEO Pat Gelsinger confirmed the company’s intention to sell part of Altera in order to prepare the division for an initial public offering (IPO) in the coming years: “To this end, we have begun negotiations with potential investors and expect to complete them at the beginning of 2025.”
The sale of its stake in Altera could provide Intel with a significant cash injection as the company continues to consider options to cut costs and streamline its business structure to emerge from the crisis. Despite the positive revenue outlook in its latest quarterly report, Intel shares are down more than 50% for the year. The former chip market leader has been under pressure from competitors after failing to take advantage of the AI boom and is now trying to jump on the fast-moving train.
Altera is headquartered in San Jose, California. The company makes programmable chips (FPGAs or FPGAs) that can be reprogrammed on the fly for a variety of applications, from processing video uploaded to websites to use in military and telecommunications equipment. Before acquiring Intel in 2015, Altera relied on TSMC, one of the world’s largest semiconductor makers, to produce a significant portion of its chips. Following the acquisition, Intel decided to move production of Altera chips in-house, which coincided with the period when the company began to lose its leadership to TSMC. This transition became a long and expensive process for Intel, as a result of which Altera lost part of its market share, losing ground to its main competitor, Xilinx, which was later acquired by AMD. Thus, Intel suffered not only financial losses, but also weakened its position in the market.