Intel Corp (INTC.O) signed a standstill agreement earlier this year with Altera Corp ALTR.O that expires on June 1, giving the world's largest chipmaker the option to launch a hostile bid after that, according to sources familiar with the matter.
The agreement, disclosed to Reuters by the sources this week, explains why Intel has refrained from launching a tender offer for Altera's shares once their negotiations broke down. It also underscores the risk Altera faces of such a hostile bid.
Earlier this month, Altera rejected an unsolicited $54 per share offer from Intel following months of negotiations, the sources said, asking not to be identified discussing confidential information. They said Altera agreed to engage in these talks on the basis that Intel would not go public with any offer until June.
In February, Intel discussed offering $58 per share for Altera, based on publicly available information it reviewed at the time, according to the people. After signing a non-disclosure agreement and combing through non-public information, including the company's outlook, it ended up revising down its offer, they said. Last week, Altera posted a sequential 9 percent decline in revenue for the first quarter and said it also expects weakness in its second-quarter guidance, particularly around its wireless business.
It is unclear whether Intel would take its proposal directly to shareholders, the sources said, but it remains an option available to it.
Intel and Altera both declined to comment.
The acquisition of Altera, which makes programmable chips widely used in cellphone towers and industrial applications and by the military, would underscore Intel Chief Executive Officer Brian Krzanich's determination to expand into new markets as the personal computer industry loses steam.
TIG Advisors LLC, an investment firm that holds shares in Altera, challenged a nomination to the company's board of directors on Monday over Altera's refusal to engage with Intel about a potential merger.
(Additional reporting by Liana Baker; Editing by Ted Botha)