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Key Takeaways
- Intel is selling a 49% stake in a joint venture that controls an Irish manufacturing facility to Apollo Global Management for $11 billion, the companies announced Tuesday.
- The move is the latest in Intel’s “Smart Capital” plan, emphasizing outside investments to allow Intel to revamp its supply chain without putting too much pressure on its balance sheet.
- The Irish facility, Fab 34, has already had roughly $18 billion spent on it.
Intel (INTC) has agreed to sell a 49% stake in a joint venture controlling Fab 34, a manufacturing site in Leixlip, Ireland, to Apollo Global Management (APO) for $11 billion, the companies announced after the bell Tuesday.
The investment is part of Intel’s “Smart Capital” strategy, its plan to revitalize and expand its supply chain without putting too much strain on its own balance sheet by bringing in outside investments. Intel will retain a 51% controlling stake in the Fab 34 facility, with Apollo receiving an equity stake in exchange for its funding.
“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 said. “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.”
Fab 34 Construction Set To Finish This Year
While the facility started manufacturing some processors in September, Intel said construction is still ongoing and is nearly completed. Intel has spent over $18 billion on the project already, and the company said Apollo’s investment allows it to focus on other areas of the business it wants to invest in while Fab 34 is completed.
“The joint venture will manufacture wafers for sale to Intel on a cost-plus-margin basis,” the company said. “Under the agreement, Intel is required to finish the build-out of Fab 34 and purchase wafers from the joint venture for itself and external customers, with minimum volume commitments for its wafer demand following the substantial completion of the facility.”
Intel said the transaction is expected to close by the end of the second quarter. The company said it believes profits will “be limited in the first two years but to increase thereafter as the factory ramps to full capacity.”
Intel shares were up roughly 1% to $30.30 about an hour before the opening bell Wednesday.