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Intel and Tower Semiconductor End Deal – Merger Arbitrage Mondays

  • August 21, 2023

Key Highlights

  • Four new M&A deals and eight new SPAC Business Combinations were announced last week.
  • Two deals were terminated last week including the acquisition of Tower Semiconductor (TSEM) by Intel (INTC) and the acquisition of Silicon Motion Technology (SIMO) by MaxLinear (MXL).
  • Pardes Biosciences (PRDS) and MediPacific confirm that the total per-share payment under the offer and merger agreement amounts to $2.13.

Intel (INTC) and Tower Semiconductor (TSEM) Terminate Deal Following Delay in Chinese Review

Intel canceled its intended purchase of Israeli chip maker Tower Semiconductor after an unsuccessful 18-month wait for Chinese regulatory review.

The deal that was announced in February last year, was expected to accelerates Intel’s path to becoming a major provider of foundry services and capacity globally. Having endured its biggest-ever company loss of $2.76 billion, Intel ventured into diversification, aiming to establish itself as a crucial domestic foundry services provider. With this goal in mind, Intel was aiming to acquire the Israeli-based analog integrated circuit foundry for $5.4 billion by mid-summer 2023.

The deal, however, was clouded by political uncertainty. Intel sought approval for the deal from China’s State Administration for Market Regulation (SAMR). Concurrently, Intel had conditional grants pending from the U.S. CHIPS and Science fund, which mandated a 10-year restriction on further investments in China. As a result, SAMR delayed its approval process, presumably aiming to address trade war implications, reminiscent of Qualcomm’s unsuccessful $44 billion bid for NXP in 2018.

The deal between Intel and Tower Semiconductor, which required global regulatory approval, fell through due to Chinese regulators failing to approve it before a Wednesday deadline last week. This collapse aligns with rising tensions between the U.S. and China, affecting American company mergers due to delays in approvals by China’s antitrust regulator. These delays might be influenced by U.S. export controls and constraints related to semiconductor technology.

Initially targeting a first-quarter closure, Intel prolonged the deal’s deadline due to China’s non-approval. Intel had envisioned the acquisition of Tower as a means to enhance manufacturing capacity and foster growth prospects in the U.S., Israel, Italy, and Japan.

Intel will pay Tower a termination fee totaling $353 million translating to $3.21 of cash per share.

“Tower was very excited to join Intel to enable Pat Gelsinger’s vision for Intel’s foundry business,” said Russell Ellwanger, Tower Semiconductor’s CEO in a written statement. “We appreciate the efforts by all parties.”

Tower’s Q2 Earnings

In the second quarter of 2023, revenue totaled $357 million, slightly higher than the first quarter’s $356 million, and lower than Q2 2022’s $426 million. Gross profit was $87 million, down from Q1’s $96 million, and well below Q2 2022’s $112 million. Operating profit was $51 million, compared to $89 million in Q1 2023, which included $32 in million restructuring income from the  reorganization of Japanese operations. Net profit for Q2 2023 reached $51 million, with earnings per share of $0.46 (basic and diluted). Q1 2023’s net profit was $71 million, with earnings per share of $0.65 (basic) and $0.64 (diluted). Q2 2023 earnings were down 12% year-over-year.

Regarding the overall semiconductor sector forecast, numerous reports indicate a dip in the first half of 2023, followed by indications of growth in the latter half of the year. Despite the anticipation of ongoing challenges for the remainder of the year, a strong expansion is projected across most, if not all, segments of the semiconductor sector in 2024 and beyond.


Tower is expected to earn $2.07 per share in 2023 and $2.34 in 2024, excluding the one time gain from the termination fee. This puts the company’s forward P/E at just under 15. Granted a foundry business is normally not a high margin business, Tower has managed to squeeze out nearly 18% net margin from gross margin just shy of 28%, although both numbers were nearly 400 basis points lower in Q2 2023.

I plugged in the EPS estimates into a 10 year DCF model and modeled 5% earnings growth after the first two years to arrive at an intrinsic value of $33.45 per share. I used a discount rate of 10% and a terminal growth rate of 2% for the model. Adding the termination fee, we get to an intrinsic value of $36.66 per share. Trading at $30.63, the stock provides 20% upside from these levels if it gets to the intrinsic value I calculated.

I plan to hold my position in Tower Semiconductor for now and also plan to retain the position in our model portfolio.

Merger Arbitrage activity decreased significantly last week with four new deals announced, three deals closing, and two deals terminated.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) which automatically updates itself during market hours.

Merger Arbitrage

Deal Statistics:

Total Number of Deals Closed in 2023114
Total Number of Deals Not Completed in 20239
Total Number of Pending Deals
Cash Deals42
Stock Deals17
Stock & Cash Deals4
Special Conditions8
Total Number of Pending Deals71
Aggregate Deal Consideration$752.09 billion

New Merger Arbitrage Deals:

  1. The acquisition of Zynerba Pharmaceuticals (ZYNE) by Harmony Biosciences Holdings (HRMY) for $60 million. Under the terms of the agreement, Harmony will commence a tender offer to acquire all outstanding shares of Zynerba for a purchase price of $1.1059 per share in cash, plus one non-tradeable contingent value right (CVR) per share, representing the right to receive potential additional payments of up to $140 million in the aggregate, subject to the achievement of certain clinical, regulatory and sales milestones.
  2. The acquisition of Holly Energy Partners (HEP) by HF Sinclair Corporation (DINO) for $4.64 billion in a cash plus stock deal. Under the terms of the agreement, shareholders of Holly Energy Partners will  receive a combination of 0.315 shares of HF Sinclair Corporation and $4.00 in cash. We added HEP as a potential deal to the Deals in the Works section on May 4, 2023, and the price after the news of the potential deal came out was $16.03.
  3. The acquisition of Crestwood Equity Partners (CEQP) by Energy Transfer (ET) for $7.1 billion in an all stock deal. Under the terms of the agreement, Crestwood common unitholders will receive 2.07 Energy Transfer common units for each Crestwood common unit.
  4. The acquisition of PhenomeX (CELL) by Bruker Corporation (BRKR) for $40.14 million or $1 per share in cash.

Deal Updates:

  1. August 16, 2023: According to a Nasdaq delisting notice Franchise Group (FRG) is set to have its last trading date on August 21, 2023.
  2. On August 17, 2023, Pardes Biosciences (PRDS) and MediPacific determined that the Additional Price Per Share, based on Pardes’ expected net cash, is $0.11 per share. Accordingly, the total cash amount that Purchaser will pay pursuant to the terms of the Offer and the Merger Agreement is $2.13 per share. MediPacific also extended the Offer’s expiration date to August 30, 2023.


  1. On August 16, 2023, Greenhill & Co. (GHL) announced that its shareholders approved the previously announced merger agreement with Mizuho Financial Group (MFG).
  2. On August 16, 2023, Urstadt Biddle Properties (UBP) announced that its shareholders approved the previously announced merger agreement with Regency Centers Corporation (REG).
  3. On August 17, 2023, Franchise Group (FRG) announced that its stockholders approved all proposals related to the proposed acquisition of the company.


  1. August 16, 2023: Secretaries of State representing seven states with a total of almost 5,000 affected stores, wrote a letter to the FTC Chair Lina Khan, asking the agency to block Kroger’s (KR) acquisition of Albertsons (ACI).

Shareholders Meeting Schedule:

  1. Liminal BioSciences (LMNL) – September 15, 2023.

Closed Deals:

  1. The acquisition of Salisbury Bancorp (SAL) by NBT Bancorp (NBTB) on August 14, 2023. It took 252 days for this deal to be completed.
  2. The acquisition of Arconic Corporation (ARNC) by Apollo Global Management (APO) on August 18, 2023. It took 106 days for this deal to be completed.
  3. The acquisition of Urstadt Biddle Properties (UBP) by Regency Centers Corporation (REG) on August 18, 2023. It took 92 days for this deal to be completed.

Terminated Deal:

  1. On August 16, 2023, Intel (INTC) and Tower Semiconductor (TSEMmutually terminated their merger agreement, due to the inability to obtain in a timely manner the regulatory approvals required under the merger agreement.​ In accordance with the terms of the merger agreement and in connection with its termination, Intel will pay a termination fee of $353 million to Tower.
  2. On August 16, 2023, Silicon Motion Technology Corporation (SIMO) issued a written notice to MaxLinear (MXL), terminating the Agreement and Plan of Merger between the parties. Silicon Motion’s position is that MaxLinear’s Willful and Material Breaches of the Merger Agreement prevented the merger from being completed by August 7, 2023.

Weekly Spread Changes:

The table below shows weekly spread changes between August 11, 2023, and August 18, 2023.

Company Quote
Last Week
Spread Change
PRDS2.135MediPacific, Inc. (N/A)-0.23%-4.04%3.81%Special Conditions
SURF0.913Coherus BioSciences, Inc. (CHRS)4.47520.48%17.10%3.38%Special Conditions
FORG21.2Thoma Bravo (N/A)9.67%6.85%2.82%All Cash
IRBT36.99Amazon (AMZN)133.2339.90%37.09%2.81%All Cash
CPRI52.02Tapestry, Inc. (TPR)34.599.57%7.26%2.31%All Cash
SCU11.2Rithm Capital Corp. (N/A)-0.45%2.01%-2.46%All Cash
SATS19.63DISH Network Corporation (DISH)6.69-2.87%-0.17%-2.70%All Stock
DHC2.95Office Properties Income Trust (OPI)6.885-65.69%-61.02%-4.67%All Stock
APGN0.3776Pyxis Oncology, Inc. (PYXS)2.18-0.41%6.15%-6.56%All Stock
SAVE16.67JetBlue Airways Corporation (JBLU)6.3485.96%92.67%-6.71%All Cash

Top 10 Merger Arbitrage Deals With The Largest Spreads:

Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as “special situation” deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.

SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$16.6706/30/202485.96%99.61%
IRBT08/05/2022Amazon (AMZN)$51.75$36.9902/05/202439.90%86.18%
ACI10/14/2022The Kroger Co. (KR)$27.25$21.8303/31/202424.83%40.46%
SURF06/16/2023Coherus BioSciences, Inc. (CHRS)$1.10$0.91309/30/202320.48%182.34%
SGEN03/13/2023Pfizer Inc. (PFE)$229.00$192.7801/31/202418.79%41.82%
DM05/25/2023Stratasys Ltd. (SSYS)$1.83$1.5912/31/202314.95%41.04%
PNM10/21/2020Avangrid, Inc. (AGR)$50.30$44.5212/31/202312.98%35.63%
HZNP12/12/2022Amgen Inc. (AMGN)$116.50$103.8912/15/202312.14%37.87%
NGMS05/14/2023Aristocrat Leisure Limited (ALL.AX)$29.50$26.8805/14/20249.75%13.27%
FORG10/11/2022Thoma Bravo (N/A)$23.25$21.209/30/20239.67%86.08%

Deals In The Works

Two new potential Merger Arbitrage deal was added to the ‘Deals In The Works‘ section last week.

  1. August 14, 2023: According to Bloomberg, DLocal Ltd., (DLO) a provider of payments services to businesses in emerging markets, is exploring options including a potential sale.
  2. August 15, 2023: According to Reuters, Private equity firm Silver Lake is preparing to explore a sale of Global Blue Group Holdings (GB), a company that enables retailers to offer tax-free shopping, after receiving expressions of interest from potential acquirers.


  1. Esmark announced a voluntary public cash and exchange offer for all issued and outstanding shares in U.S. Steel Corporation (X) for $35 USD per share.
  2. LL Flooring Holdings (LL) announces exploration of strategic alternatives.
  3. Esmark majority owner and Chief Executive James Bouchard said in an interview that his steelmaker has cash for its $7.8 billion bid for U.S. Steel Corp (X) sitting in his bank account.
  4. ArcelorMittal SA (MT) is considering a potential offer for U.S. Steel Corp (X).
  5. LL Flooring Holdings (LL) founder Tom Sullivan withdrew his proposal to buy the flooring business.

SPAC Arbitrage


  1. On August 17, 2023, 99 Acquisition Group Inc (NNAGU). announced the pricing of $75 million Initial Public Offering.

SPAC Business Combination

  1. On August 11, 2023, Oak Woods Acquisition Corporation (OAKU) and Huajin entered into a business combination agreement.
  2. On August 11, 2023, Swiftmerge Acquisition Corp. (IVCP) and HDL Therapeutics entered into a definitive agreement for a business combination.
  3. On August 14, 2023, AlphaVest Acquisition Corp (ATMV) and Wanshun Technology Industrial Group Limited entered into a Business Combination Agreement.
  4. On August 15, 2023, two (TWOA) and LatAm Logistic Properties S.A. entered into a definitive business combination agreement.
  5. On August 15, 2023, Pono Capital Three, Inc. (PTHRentered into a definitive business combination agreement with Robinson Aircraft Ltd.
  6. On August 15, 2023, TortoiseEcofin Acquisition Corp. III (TRTL) and One Energy Enterprises entered into a definitive business combination agreement.
  7. On August 17, 2023, Global Blockchain Acquisition Corp. (GBBK) and Cardea Corporate Holdings, Inc. entered into a definitive agreement for a business combination.
  8. On August 17, 2023, LAMF Global Ventures Corp. I (LGVC) and Nuvo Group Ltd. announced that they have entered into a definitive business combination agreement.


  1. On August 15, 2023, Black Spade Acquisition Co (BSAQ) and VinFast Auto Ltd. (VFS) announced the completion of their previously announced business combination.
  2. On August 17, 2023, Hainan Manaslu Acquisition Corp. (HMACcompleted its previously announced business combination with Able View Global Inc. (ABLV).


  1. On August 16, 2023, Genesis Growth Tech Acquisition Corp., (GGAA) and NextTrip Holdings mutually terminated their business combination.

List of all pending Merger Arbitrage deals:

Disclaimer: I have long positions in Activision Blizzard (ATVI), Spirit Airlines (SAVE) and Tower Semiconductor (TSEM). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.