Intel to scrap $5.4B Tower acquisition after China delays review

Without Chinese regulatory permission, Intel Corp. will withdraw its $5.4 billion bid to acquire Tower Semiconductor Ltd. when their contract ends later on Tuesday.

Sources with knowledge of the situation, who asked to remain anonymous ahead of a formal announcement, claimed that Intel, which signed the contract to acquire Israeli contract chipmaker Tower in February 2022, failed to obtain Chinese regulators' approval for the acquisition in a timely manner as required by the contract.

The development highlights how tensions between the United States and China over issues like trade, intellectual property, and Taiwan's future are affecting corporate dealmaking, especially when it comes to technology companies.

According to the sources, Intel will not attempt to extend the contract and will instead pay Tower a break-up fee of $353 million in order to terminate it.

When the companies extended their contract instead of waiting for the review to be finished, it was unclear whether the regulators would have approved the deal.

Tower and Intel both declined to comment. Representatives from China's antitrust authority, the State Administration for Market Regulation, could not be reached for comment immediately.

After delays in obtaining approval from Chinese regulators, DuPont De Nemours Inc. cancelled its $5.2 billion agreement to acquire Rogers Corp. last year.

In order to meet with government representatives, Intel Chief Executive Pat Gelsinger recently traveled to China. Gelsinger had previously stated that he was working to get the Tower deal approved by Chinese regulators.

Despite the Tower deal, Gelsinger also stated that Intel was continuing to invest in its foundry division, which produces chips for other businesses.