M&A Alert - June 4, 2009
Intel Agrees to Acquire Wind River
Transaction Overview
On June 4, 2009, Intel (NASDAQ: INTC) agreed to acquire Windriver (NASDAQ: WIND) for $884mm in cash.
Target Description
Wind River Systems develops a Real Time Operating System (“RTOS”), and supporting software development platform for embedded computing applications such as aerospace and defense equipment, automotive systems, industrial equipment and networking equipment. Wind River is most well known for their VxWorks RTOS which is one of the most well established RTOS within the embedded market. In recent years, Wind River began to play defense against the open source threat represented by Linux by introducing their own build of the Linux operating system optimized for embedded computing applications. Wind River has more than 350 customers and partners, including device OEMs, semiconductor vendors and communications equipment vendors. Clients include Apple, Hewlett-Packard, Boeing, Motorola, NASA, and Mitsubishi. Wind River was founded in 1981 and is headquartered in Alameda, California.
Buyer Description
Intel designs and manufactures semiconductors and related components for computing and communications devices such as desktops, workstations, servers, notebooks, netbooks, mobile Internet devices, as well as for embedded products such as point-of-sale systems, panel PCs, and automotive infotainment systems. Intel is most well known for its Xeon, Centrino, Core2, Pentium and Celeron processors for desktop and notebook computers and its recently launched Atom processor for embedded and mobile internet devices. In 2007, as part of its embedded strategy, Intel launched Moblin, a Linux-based operating system and software development platform built for its Atom processors, which is currently being deployed in Acer Aspire netbooks. Renee James, Vice President and General Manager of Intel’s Software and Services Group, was the key executive sponsor of the acquisition. Intel was founded in 1968 and is based in Santa Clara, California.
 |
|
| Purchase Price: | |
| Equity Value of Consideration | $884mm |
| Enterprise Value of Consideration | $793mm1 |
| Purchase Price Multiples: |
|
| Enterprise Value / LTM Revenue2 | 2.2x |
| Enterprise Value / LTM EBITDA2 | 20.9x |
| Enterprise Value / LTM Net Income2 | 80.4x |
|
|
| Offer Premium: | |
| 1 Day before Announcement | 44% |
| 1 Week before Announcement | 49% |
| 30 Days before Announcement | 54% |
|
Source: Architect Partners, Capital IQ and Public Information
(1) Enterprise Value includes Wind River’s net assumed liabilities of $91mm
(2) LTM is as of 04/30/2009. LTM Revenue, EBITDA and Net Income were $354mm, $38mm, and $11mm respectively
Strategic Rationale
Wind River will enable Intel to grow its processor and software presence outside its traditional strength within the PC and server market segments into the smaller but higher growth embedded market. Wind River strongly bolsters Intel’s embedded RTOS offerings significantly strengthening their embedded market credibility. Also given, the extremely demanding requirements of many embedded computing applications, it’s essential that the semiconductor chips are closely tuned to the device and application, and tight integration with the operating system is essential. Embedded devices are expected to grow at a compound annual rate of 16.9% to become a $1.2b market by 2013 (source: IDC).
Architect Partners’ Observations
This is a watershed transaction. Intel’s move signals a very material shift in its strategy on two levels. First, it’s a very aggressive move to bolster its embedded computing business, signaling a significant shift from its PC and server roots. Second, it suggests that the RTOS, and its integration with the underlying semiconductor, is a very important consideration for embedded computing vendors. Intel had initially addressed the embedded market opportunity by launching Moblin (RTOS) and Atom (semiconductor) but the acquisition of Wind River brings decades of embedded credibility and the industry leading customer base. This move is clearly a wakeup call for other embedded semiconductor vendors such as Freescale, Broadcom, Xilinx and Texas Instrument who do not have an RTOS on which to continue to build their embedded businesses.