The companies hope to finalize the acquisition in six to nine months. It will need regulatory approval from governments around the globe. TI has said as many as 10 regulatory bodies must approve the deal.
TI’s motivation for the acquisition is an immediate and significant expansion of its product line. Moreover TI will gain the knowledge base of National’s analog IC design team, and top analog engineers are in short supply. TI will also acquire valuable analog IC fabs located around the globe.
“This acquisition is about strength and growth,” said Rich Templeton, TI’s chairman, president and chief executive officer. “National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth. In recent years, National’s management team has done an outstanding job of improving margins and streamlining expenses, which upon close will increase TI’s profitability and earnings per share, excluding transaction costs. Our ability to accelerate National’s growth with our much larger sales force is the foundation of our belief that we can produce strong returns on our investment. The combined sales team will be 10 times larger than National’s is today, and the portfolio will be exposed to more customers in more markets.”
Complementary or competitive?
Both companies have pointed out that their product lines are more complementary than competitive, presumably making the acquisition a good move for the two companies and the customer base. But the companies clearly have many competing products in the analog segment. And both companies have aggressively targeted the LED-based SSL market with constant current driver ICs.
According to IMS Research, TI and National held the first and second position in market share for LED driver ICs in 2010. Jamie Fox, senior LED lighting analyst at IMS Research, commented: “We estimate that TI held around 19% of this market in 2010, whilst National took 7%. The new combined company will be four times bigger than its nearest competitor in this high-growth market, which was worth nearly $1 billion in 2010.”
SSL luminaire and driver module developers will need to make careful IC choices in the coming months. The regulatory hurdles will delay an integration of the two companies’ product lines. In an email to customers, TI’s Templeton wrote “There will be no obsolescence of products.” But invariably when two companies come together there are changes in the product portfolio. And certainly the deal could impact the fate of new driver ICs that are just coming to market.
It will also be interesting to see how the acquisition might impact driver IC prices. Competing as the two leaders in the driver market, the companies have surely faced price pressure to win business. The combined organization may have more leverage to push prices upward.