(Bloomberg) — Apollo Global Management Inc. has offered Intel Corp. a billion-dollar investment, people familiar with the matter said, signaling the chipmaker’s confidence in its turnaround strategy and offering an alternative to a potential takeover by larger rival Qualcomm Inc.
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The alternative asset manager has indicated in recent days that it is willing to make an equity-like investment of up to $5 billion in Intel, said one of the people, who asked not to be identified discussing confidential information.
The development comes after San Diego-based Qualcomm floated a friendly takeover of Intel, which is working to reinvent itself during the most difficult period in its 56-year history. Qualcomm’s move has raised the prospect of one of the biggest M&A deals ever, as well as the entry of more bidders into the fray. Broadcom Inc. is on the sidelines, at least for now.
Intel shares rose by as much as 4.2 percent in early trading on Monday. As of 9:43 a.m. in New York, the stock was up 2.7 percent, giving the company a market value of around $96 billion.
Intel executives have reviewed Apollo’s proposal, the people said. The size of Apollo’s potential investment could change or talks could fall apart, they said. Representatives for Apollo and Intel, based in Santa Clara, Calif., declined to comment.
Apollo is best known today for its insurance, buyout and credit strategies, but it began in the 1990s as a specialist in investing in distressed assets. The company also has a business relationship with Intel, which in June agreed to sell a stake in a joint venture controlling a chip factory in Ireland to Apollo for $11 billion, bringing in further outside funding for a massive expansion of its factory network.
Under CEO Pat Gelsinger, Intel is working on a costly plan to reposition itself and attract new products, technologies and outside customers. Yet the company is facing its third consecutive year of declining sales and its shares have lost more than 50 percent of their value this year.
Intel shares rallied last week after Gelsinger made a series of announcements that signaled the beginning of a turnaround, including a multibillion-dollar deal with Amazon.com Inc.’s cloud unit Amazon Web Services to jointly invest in a custom AI semiconductor and a plan to turn its struggling manufacturing business into a wholly owned subsidiary. Intel also said it would pull back from some projects, including plans for new factories in Germany and Poland, which will be put on hold for now.
Gelsinger believes the reorganization plan could be enough to allow Intel to remain an independent company, but is open to exploring other transactions, people familiar with the matter said Saturday. Broadcom is not currently considering an offer for Intel, the people said, but has already reviewed whether to pursue a deal.
A merger between Intel and a larger competitor would almost certainly attract the close attention of antitrust regulators around the world, as chips are now an integral part of the digital infrastructure of our daily lives – from smartphones and computers to washing machines and electric vehicles.
A deal between Qualcomm and Intel would face numerous hurdles, Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada wrote in a note.
“The deal faces significant regulatory, financial and execution challenges,” they wrote. “With only $13 billion in cash, Qualcomm would likely need additional investors and asset divestitures to make the purchase viable. The strategic fit of the deal could also raise concerns.”
Apollo has additional experience in chip manufacturing. Last year, the New York-based company agreed to lead a $900 million investment in Western Digital Corp., buying convertible preferred stock.
– With assistance from Dinesh Nair, Michelle F. Davis, Shadab Nazmi and Yasufumi Saito.
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