November 18, 2015 / 2:31 PM / 3 years ago

TowerJazz buys Maxim chip plant in Texas for $40 million in stock

TEL AVIV (Reuters) - Israeli specialty chip maker TowerJazz has agreed to buy Maxim Integrated Products’ wafer manufacturing plant in San Antonio, Texas for $40 million in an all-share transaction.

The deal will expand TowerJazz’s manufacturing capacity by approximately 28,000 wafers per month and provide potential revenue of up to $200 million annually within three to four years, it said.

The additional capacity will serve TowerJazz’s current and forecasted customer demand. The deal is expected to close in January.

TowerJazz also agreed a deal to manufacture products for Maxim in the San Antonio facility. Maxim, which will hold 3 percent of TowerJazz’s stock, will become one of its largest customers.

“This gives us a window of time to build our third party business and that’s a big deal,” TowerJazz Chief Executive Russell Ellwanger told Reuters.

All of the site’s employees, numbering almost 500, will be retained.

Ellwanger said the acquisition will add to company earnings “from day one”.

TowerJazz, a maker of chips for smartphones, battery chargers, AC/DC adapters and image sensors, operates two plants in Israel, one in California and three in Japan through its joint venture with Panasonic Corp.

The company lost money for years following heavy investments in its second chip plant in Israel but has become profitable in the last couple of quarters. It expects fourth-quarter revenue to grow 7 percent to $252 million, plus or minus 5 percent.

One of the first businesses TowerJazz will bring to the Texas plant is front-end modules for antenna switches, which enable mobile devices to send and receive signals.

“This deal follows our model of acquiring capacity of an existing or new customer, where the customer still needs that capacity for a number of years,” Ellwanger said.

Reporting by Tova Cohen, editing by Louise Heavens

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