(Bloomberg) — Intel Corp. has agreed to sell a stake in the venture that manages its Irish plant to Apollo Global Management Inc. for $11 billion. This will help us secure more external funding for large-scale expansion of our factory network.
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Under the terms of the deal, the investment firm will acquire a 49% stake in the joint venture that operates Intel’s Fab 34, the chipmaker said in a statement Tuesday. This is the second investment program announced by Intel and is part of its efforts to reduce the burden on its already tight finances.
CEO Pat Gelsinger is pursuing an ambitious and expensive plan to return Intel to the top of the semiconductor industry. He is investing heavily to revitalize his struggling product lineup, pouring money into factories around the world, revitalizing manufacturing and attracting external outsourced manufacturing customers.
Intel, once the wealthiest company in the semiconductor industry, had to seek external financing through a program called “Smart Capital.”
“This announcement represents continued progress in Intel’s transformation strategy,” the company said in a statement. “The company continues to evolve to create financial flexibility and accelerate our strategy, including investments in our global manufacturing operations, while maintaining a strong balance sheet.”
Intel said construction of the plant at the company’s existing site in Leixlip, near Dublin, is “substantially complete.” The deal, which will allow Intel to invest its funds elsewhere, is expected to close in the second quarter of 2024. Fab 34 will use Intel’s 4 and 3 manufacturing technologies.
Under the terms of the agreement, Intel will purchase a minimum amount of factory output to sell on its own or on behalf of its customers. The contract states that the chipmaker will prioritize that factory over other factories on the network when choosing where production will be processed. Construction is scheduled to be mostly completed by June.
In 2022, Intel announced an agreement with Brookfield Infrastructure Partners LP to secure a $15 billion commitment to finance a semiconductor complex in Arizona.
The deal helped allay fears that Gelsinger’s revival plan would cost too much. A string of weak earnings results, coupled with a loss of market share to rivals such as Nvidia Corp., have reignited those concerns and weighed on Intel’s stock.
Shares fell less than 1% in New York trading Tuesday to $30.03, making it the worst performer among the Philadelphia Stock Market Semiconductor Index. They are down 40%.
(Terms of agreement in paragraph 7 have been updated.)
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