Texas Instruments Inc. (NYSE: TXN) wants to add $1 billion to its war chest via a debt offering, and it may use some of the funds to strengthen itself for future acquisitions.
The company said in a press release that it wants to use the net proceeds "for general corporate purposes which, among other things, could include repurchases of common stock." That catch-all phrase could involve more than just buying back shares. It may extend to acquisitions and property and equipment funding.
In my opinion, TI is taking advantage of the extremely favorable borrowing climate to add firepower for bite-size acquisitions in the semiconductor area that would complement its product portfolio. The company is known for making strategic acquisitions of plants and equipment during market slowdowns or when other industry players want to raise funds or simply shift manufacturing to foundry wafer vendors.
The planned offering will substantially raise TI's cash and short-term investment balance, which stood at $2.33 billion at the end of June. Its long-term debt fell from $4.2 billion at the end of March to $2.7 billion at the end of June.
The offering is certainly not going to hurt TI's credit rating. Standard & Poor’s said in an email that it "assigned its 'A+' issue rating" to the planned senior unsecured notes, and that the company can easily "accommodate the transaction." The agency also said TI's leverage will swing up only to "about 1.5x from 1.2x as of June 30, 2012."
I believe the analog IC and DSP company would be well positioned to raise more money if necessary. Standard & Poor's said its "$1.5 billion of debt maturing in May 2013, will be repaid, and that adjusted leverage should revert below 1.5x over the near term."