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Intel (INTC.O) has pounced to acquire Israeli driverless technology company Mobileye (MBLY.N) for $15.3 billion on Monday, by doing so Intel aggresively position themselves in a dominant role in the autonomous-driving industry, which seems to be a mistake they wish to avoid, after missing the opportunity for mobile phones.
The acquisition is an all-cash deal at $63.54 per share, the price represents a premium of around 33 percent to Mobileye’s Friday closing price (of $47 a share) which makes it the largest tech takeover in Israel’s history and the world’s largest purchase of a company solely focused on the self-driving technology.
Mobileye accounts for 70 percent of the global market for driver-assistance and anti-collision systems. It employs 660 people and had adjusted net income of $173.3 million last year.
Intel will integrate its own automated driving operations with Mobileye’s operations, with the combined entity being run by Mobileye Chairman Amnon Shashua from Israel.
Intel Chief Executive Brian Krzanich said the acquisition, which unites Intel’s processors with Mobileye’s computer vision, was akin to merging the “eyes of the autonomous car with the intelligent brain that actually drives the car.”
Intel said it expected the transaction to close within the next nine months and to immediately boost its non-GAAP earnings per share and free cash flow.
“It’s an area where Intel has had very little presence – the automotive market, and so this is a tremendous opportunity for them to get into a market that has significant growth opportunities,” said Betsy Van Hees, an analyst at Loop Capital Markets who has a “buy” rating on Intel shares, Mobileye’s technology is very critical … The price seems fair,”
Because Mobileye’s Shashua will remain in charge and the new combined entity will be based in Israel, analysts said they expected it to be far more difficult for rivals to mount a counter-offer for Mobileye.
Shashua and two other senior Mobileye executives stand to do well by the deal: together they own nearly 7 percent of the company. Shmuel Harlap, Israel’s biggest car importer and one of Mobileye’s earliest investors, also holds a 7 percent stake.
Yossi Vardi, seen as the godfather of Israeli high-tech, said the deal was a big endorsement of the whole sector.
“I’m sure that this … will be a very important impetus to create a whole industry related to autonomous and connected vehicles (in the country),” he said.
Automakers and their suppliers have been expanding alliances in the race to develop self-driving cars, a sector that once seemed a science-fiction dream but is drawing closer to reality month after month.
Mobileye and Intel are already collaborating with German automaker BMW (BMWG.DE) on a project to put a fleet of around 40 self-driving test vehicles on the road in the second half of this year.
Mobileye have teamed up with Intel for its fifth-generation of chips that will be used in fully autonomous vehicles that are scheduled for delivery around 2021.
While Intel is renowned for hardware chips and Mobileye for collision detection software, their merger promises to create the most complete portfolio of technologies needed for driverless vehicles, including cameras, sensor chips, in-car networking, roadway mapping, machine learning and cloud software, as well as the data centres needed to manage all the data involved.
Last October, Qualcomm announced a $47 billion deal to acquire the Netherlands’ NXP, the largest automotive chip supplier, putting pressure on other chipmakers seeking to make inroads into the market for autonomous driving components, including Intel, Mobileye and rival NVIDIA.
The Qualcomm-NXP deal, which will create the industry’s largest portfolio of sensors, networking and other elements vital to autonomous driving, is expected to close later in 2017, subject to regulatory and shareholder approvals.
Mobileye for over a decade has relied on Franco-Italian chipmaker STMicroelectronics to produce chips that the Israeli company sells to many of the world’s top automakers for its current, third-generation of driver-assistance systems.
Mobileye’s relationships with car manufacturers, leading supplier’s and STMicroelectronics will continue uninterrupted, the companies said in their statement, and Mobileye’s current product roadmap will not be affected.
Founded in 1999, Mobileye made its mission to reduce vehicle injuries and fatalities. After receiving an investment of $130 million from Goldman Sachs in 2007, it IPO’d on the New York Stock Exchange in 2014.
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