Broadcom, TSMC Weigh Deals To Split Intel; Activist Hedge Funds Ready To Pounce?

Intel shares climbed 5% in premarket trading (extending gains from last week’s pump) following a report from The Wall Street Journal indicating that Broadcom and Taiwan Semiconductor Manufacturing are considering potential deals that could result in a breakup of the struggling US chipmaker. 

WSJ noted:

Broadcom has been closely examining Intel’s chip-design and marketing business, according to people familiar with the matter. It has informally discussed with its advisers making a bid but would likely only do so if it finds a partner for Intel’s manufacturing business, the people said.

Last week, Intel shares recorded the largest weekly gain in the company’s four-decade trading history after Bloomberg reported that TSMC was in early discussions to acquire a controlling stake in Intel’s factories at the request of Trump administration officials.

“But the potential deals would have been unthinkable until Intel’s recent struggles made it an acquisition target,” WSJ’s Asa Fitch, Lauren Thomas, and Yang Jie pointed out, adding, ”The end result could be a breakup of Intel after the American icon spent many decades dominating the business of making central processors for both personal computers and data centers.” 

Given our understanding last August, it was not unthinkable that Intel holds excess value within its enterprise, particularly in its fabs…

Intel has 15 fabs; the fabs alone are worth $10bn/each in liquidation value.

The value created by management is negative $50 billion. https://t.co/HkqUQJ4A6J

— zerohedge (@zerohedge) August 2, 2024

WSJ sources said that Frank Yeary, Intel’s interim executive chairman, has been spearheading discussions with potential buyers as well as officials from the former Trump administration, who view the company’s chip production as critical to national security. Yeary has privately told folks behind the scenes that his goal is maximizing value for Intel shareholders. 

This could be an excellent time for an activist hedge fund—such as Elliott Management—to step in and stir the pot, as valuation discussions behind those fabs and the company are likely worth in the $35-$40 range, if not higher.

Now would be a great time for an activist hedge fund to come in with a stalking horse bid (cc: Elliott) https://t.co/5wIgZ9y1AJ

— zerohedge (@zerohedge) February 18, 2025

Generational low… 

WSJ noted that Broadcom and TSMC aren’t working together and that all discussions have been preliminary and largely informal.