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TI to buy National Semiconductor for $6.5 billion

Texas Instruments and National Semiconductor boards of directors have already approved the all-cash deal, which makes TI's sales force "10 times larger."

Texas Instruments plans to purchase fellow analog chipmaker National Semiconductor for $6.5 billion, the companies announced today.

TI is paying cash for National Semi. Stockholders will get $25 per share, an $11 per share premium over the $14.07 National Semi shares closed at today. Both boards have already approved the deal. There is a "break-up fee" of $200 million.

TI says the companies' sales force together will be "10 times larger" after the acquisition. Combined, the two could capture a 17 to 18 percent market share, company executives said on a conference call this afternoon. Because it will have to clear some regulatory hurdles, executives expect the deal to close in six to nine months.

"This acquisition is about strength and growth," Rich Templeton, TI's chairman and CEO, said in a statement. "National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth."

TI says National Semi's portfolio will add 12,000 products to its own 30,000.

"National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth."
--Texas Instruments CEO Rich Templeton

"Our two companies complement each other very well," National Semi CEO Don Macleod said in a statement. "TI has much greater scale in the marketplace, with its larger portfolio of products and its large global sales force. This provides a platform to enhance National's strong and highly profitable analog capability, power management in particular, leading to meaningful growth."

TI execs stressed that the acquisition is intended to help the chipmaker grow its market share, especially in specific areas of the market like power management. TI also has its sights set on utilizing the fabs, or chip manufacturing facilities, that National Semi has. Most of its analog competitors are running at almost full capacity in their factories, and Templeton said adding more fabs means the combined company will "have great growth headroom that few companies have in the world right now."

Texas Instruments stock was down 1.5 percent following the news in after-hours trading to $33.61 per share. But National Semi's got a huge lift, rising 72 percent, or more than $10, to $24.27 after the announcement.

This post was updated at 3:38 p.m. PT with information from the conference call discussing the acquisition.

Correction at 9:40 a.m. PT on April 5: This post initially misstated how TI would grow as a result of the acquisition. Buying National Semi would make the combined companies' sales force will 10 times larger.