In the latest move by a technology company to advance the development of self-driving cars, Intel Corp. (INTC, Financial) announced on March 13 it has reached an agreement to buy Israel’s Mobileye NV (MBLY, Financial) for approximately $15.3 billion.
Under the terms of the agreement, an Intel subsidiary will acquire all of Mobileye’s issued and outstanding ordinary shares for $63.54 per share in cash, a 34% premium over its closing price on Friday.
Mobileye shares rose 31% while Intel shares fell 1.1% in premarket trading after the announcement.
As Intel expects autonomous cars will produce 4,000 gigabytes of data per day by 2020, the deal is expected to not only accelerate the advancement of innovation in the auto industry, but position Intel as a leader in autonomous vehicle technology. The two companies hope to combine their best technologies to bring transformative solutions to the industry.
“By pooling together our infrastructure and resources, we can enhance and accelerate our combined know-how in the areas of mapping, virtual driving, simulators, development tool chains, hardware, data centers and high-performance computing platforms,” Ziv Aviram, Mobileye co-founder, president and CEO, said. “Together, we will provide an attractive value proposition for the automotive industry.”
The combined company will consist of Mobileye and Intel’s Automated Driving Group and will be headquartered in Israel. Operations will be overseen by Mobileye co-founder, Chairman and Chief Technology Officer Amnon Shashua.
Intel said the agreement is expected to be immediately accretive to its non-GAAP EPS and free cash flow. It plans to fund the acquisition with cash from the balance sheet.
For Mobileye, the acquisition represents Israel’s largest technology deal to date.
The deal is expected to close within the next nine months and has already been approved by both companies’ board of directors. Other than gaining standard regulatory approval, Mobileye shareholders will meet at a later date to adopt certain resolutions related to the transaction.
Based in Jerusalem, Mobileye has a market cap of $13.6 billion; its shares were trading around $61.34 on Monday with a price-earnings (P/E) ratio of 135.9, a forward P/E ratio of 45.5, a price-book (P/B) ratio of 19.4 and a price-sales (P/S) ratio of 40.6.
Frank Sands (Trades, Portfolio) has the largest position in Mobileye among the gurus. He holds 3.6% of outstanding shares, which represents 0.9% of his total assets managed. Ron Baron (Trades, Portfolio), Jim Simons (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), David Carlson (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Chuck Royce (Trades, Portfolio) also hold the stock.
California-based Intel has a market cap of $166.24 billion; its shares were trading around $35.16 on Monday with a P/E ratio of 16.6, a forward P/E ratio of 12.8, a P/B ratio of 2.5 and a P/S ratio of 2.8.
PRIMECAP is Intel’s largest guru investor with 0.67% of outstanding shares, representing 1.13% of its total assets managed. In total, 24 gurus own the stock.
Intel CEO Brian Krzanich expressed his optimism for the deal, emphasizing not only how their technology would help take autonomous vehicles to the next level, but how it would benefit shareholders, the industry and consumers.
“Intel provides critical foundational technologies for autonomous driving, including plotting the car’s path and making real-time driving decisions,” Krzanich said. “Mobileye brings the industry’s best automotive-grade computer vision and strong momentum with automakers and suppliers. Together, we can accelerate the future of autonomous driving with improved performance in a cloud-to-car solution at a lower cost for automakers.”
Disclosure: I do not own any stocks mentioned in the article.
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