Intel to Sell 49% Stake in Irish Plant to Apollo for $11 Billion; Debts Mounting Up

Introduction

In a significant move to secure external funding, Intel Corp. has agreed to sell a 49% stake in its Fab 34 plant in Leixlip, Ireland, to Apollo Global Management Inc. for $11 billion.

Investment: Apollo will invest $11 billion.
Stake acquired: Apollo will get a 49% stake in a joint venture entity that will own the Fab 34 facility in Leixlip, Ireland. Intel will retain a 51% controlling interest.
Benefits for Intel: This deal allows Intel to free up capital (around $11 billion) that it can reinvest in other parts of its business and chip manufacturing efforts around the world.

The transaction, which is expected to close in the second quarter of 2024, is part of Intel’s broader strategy to manage financial pressures while expanding its global manufacturing network.

Intel’s agreement with Apollo gives us additional flexibility to execute our strategy as we invest to create the world’s most resilient and sustainable semiconductor supply chain.
Intel CFO David Zinsner

Background on Intel’s Strategic Shift

Intel, once the undisputed leader in the semiconductor industry, has faced increasing competition and financial challenges in recent years.

Under the leadership of CEO Pat Gelsinger, Intel has embarked on a comprehensive plan to regain its market dominance.

This includes revitalizing its product lineup and significantly expanding its manufacturing capabilities worldwide.

Gelsinger’s strategy aims to attract outsourced manufacturing customers by leveraging Intel’s advanced production technologies.

Intel Financial Strategy: Apollo & Smart Capital

The deal with Apollo is a key component of Intel’s “Smart Capital” initiative, which is designed to reduce financial strain while enabling large-scale investments in manufacturing.

By selling nearly half of its interest in the Irish venture, Intel can reallocate resources to other critical areas, ensuring financial flexibility and maintaining a robust balance sheet.

“Our investments in leading-edge capacity in the U.S. and Europe will be critical to meet the growing demand for silicon, with the global semiconductor market poised to double over the next five years.”

Intel CFO David Zinsner

Details of the Intel Apollo Deal

Apollo Global Management will acquire a 49% share in the joint venture operating Intel’s Fab 34. This state-of-the-art facility will employ Intel’s cutting-edge 4 and 3 manufacturing technologies.

Located at Intel’s existing site near Dublin, the construction of Fab 34 is largely complete, with full completion expected by June 2024.

The transaction, set to close in the second quarter of 2024, includes an agreement that Intel will purchase a minimum output from Fab 34, either for its own use or on behalf of its customers.

Additionally, Intel will prioritize Fab 34 over other facilities in its network for production tasks.

Previous Investments and Financial Challenges

This latest transaction follows a similar strategy employed in 2022, when Intel secured a $15 billion commitment from Brookfield Infrastructure Partners LP to finance a semiconductor complex in Arizona.

Image Credits: bloomberg

These strategic moves are crucial for Intel, which has been grappling with financial challenges due to the high costs associated with its revival plans and increasing competition from rivals like Nvidia Corp.

Market Performance and Future Prospects

Despite these strategic investments, Intel’s stock performance has been underwhelming.

The shares closed at $30.03 in New York trading on Tuesday. This reflects a decline of nearly 40%, making Intel the worst performer in the Philadelphia Stock Market Semiconductor Index.

However, the sale to Apollo is a positive step towards Intel’s transformation strategy. Intel is attracting significant external investments to maintain its financial health. This strategy supports its vision of reclaiming leadership in the semiconductor industry.