To rapidly expand its customer base and product portfolio, digital signal processing (DSP) giant Texas Instruments has inked an acquisition deal with analog and power leader National Semiconductor Corp. (News - Alert) Under this definitive agreement, TI will acquire National for $25 per share in an all-cash transaction of about $6.5 billion.

According to TI, the boards of directors of both companies have unanimously approved the transaction. It is expected to close in six to nine months.

In a statement, Rich Templeton, TI's chairman, president and chief executive officer (CEO) said, "This acquisition is about strength and growth. National has an excellent development team, and its products combined with our own can offer customers an analog portfolio of unmatched depth and breadth.”

 In recent years, he added, “National's management team has done an outstanding job of improving margins and streamlining expenses, which upon close will increase TI's profitability and earnings per share, excluding transaction costs. Our ability to accelerate National's growth with our much larger sales force is the foundation of our belief that we can produce strong returns on our investment.  The combined sales team will be 10 times larger than National's is today, and the portfolio will be exposed to more customers in more markets."

Adding to Templeton’s statement, National’s CEO Don Macleod said, "Our two companies complement each other very well. TI has much greater scale in the marketplace, with its larger portfolio of products and its large global sales force. This provides a platform to enhance National's strong and highly profitable analog capability, power management in particular, leading to meaningful growth."

Complementing TI's breadth of 30,000 analog products, extensive customer reach, and industry-leading manufacturing including the world's first 300-mm analog factory, National brings a portfolio of 12,000 analog products, a strong position with customers in the industrial power market, and excellent customer design tools. Upon close of the transaction, National becomes part of TI's analog segment, and sales of analog semiconductors will represent almost 50 percent of TI's revenue, TI said.

The combined company will also benefit from National's manufacturing operations, located in Maine, Scotland and Malaysia, which TI will continue to operate.  Each site has additional capacity to increase production.  National's headquarters will remain in Santa Clara, California, TI said.

The market for analog semiconductors was $42 billion in 2010.  TI was the market leader with 2010 analog revenue of $6.0 billion or 14 percent of the market. National's revenue in calendar year 2010 was about $1.6 billion, or 3 percent of the market.