TI to Beef Up Cash With $1B Offering

{complink 5703|Texas Instruments Inc.} 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. {complink 7065|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.”

12 comments on “TI to Beef Up Cash With $1B Offering

  1. Ashu001
    July 30, 2012


    You said TI has $2.4 Billion in cash and other equivalents.

    The more important question is how much of that cash is held off-shore in Tax havens like Canary Islands,etc.

    This information is important;because if my reading/understanding of this issue is correct;then a significant chunk of that Cash pile is held offshore which won't come back to the US because of punitive Tax rates.

    On the other hand,because Bond Interest rates for the most well capitalized organizations are so low today(thanks to the Feds super-low Interest rates);its more cost-effective for them to raise Cash this way especially to pay Shareholders through Dividends and  Share-Buybacks.

    All the Tech giants including Microsoft and Google are doing this. I won't be surprised if TI is also about to do the same.

    Shows you how perverse our Tax laws and especially Tax-avoidance has become here in the US.

    We have a Debt Ceiling Debate on our massive Debt Burdens coming in August-September.If this is not resolived satisfactorily we will see a replay of last Falls action ;won't it make more sense for the Govt to issue a one-time Tax holiday for all these corporations to bring all that cash home today?




  2. Houngbo_Hospice
    July 30, 2012


    How will the offering impact the company's revenue and profit for the coming quarter? Many companies are blaming the current global ecomic uncertainties for their weak revenue. Is TI doing any better than its competitors? 

  3. Ashu001
    July 30, 2012


    I Doubt that they will see major improvements in their Financial Performance just by strengthening their Balance Sheets.

    At the maximum one can see them improving their Dividend Payout and Share Buybacks using this cash.

    TIs performance this Quarter was very much in line with Analyst expectations.

    But they also are worried about how Q3 and Q4 pan out going ahead.



  4. bolaji ojo
    July 30, 2012

    Ashish, You picked the wrong company though your point is very valid. Texas Instruments cash may be in some foreign account but I doubt the company has a great deal of loot anywhere. It's not TI that should be the focus of such a discussion because it just relatively speaking doesn't rank that high in the group of cash-rich technology companies.

    Here are the numbers, which you are may be aware of but humor me while I restate them here: Apple ($117.2 billion in cash, short-term and long-term investments); Microsoft ($72.8 billion); Google ($44.2 billion); Intel ($14.8 billion.) TI doesn't even rate a mention.

    July 31, 2012

    It is better to compare TI against other analog companies than the likes of Apple and MSFT and Google.  Better gauges are Maxim, Infineon, STM, LinearTech etc. In terms of 1.2 or 1.5x leverage, what is the consensus on reasonable levels for a major analog IC company?

  6. Ashu001
    July 31, 2012


    TIs Numbers are not as massive as the rest of the Giants;but they still have plenty of Cash held Offshore ;which could easily be repatriated back to the US if Tax Conditions were favorable.

    I am very much in favor of a One-time Tax Holiday which permits most US Headquartered Companies to bring back most of their Overseas profits back to the US.

    Its  a one-stroke way to reduce America's Budget and Trade Deficits and permits us to run a relatively loose Fiscal policy for a longer stretch of time(until The Economy Heals better after what happened in 2008).

    Too bad same thing is set to happen again in 2012-2013 also.

    But then as they say-Politics always Trumps Economics.we are heading for a massive Debt Ceiling induced crash as well as a Fiscal Cliff here in America.



  7. Ashu001
    July 31, 2012


    Your kiddin' right?

    Where are the synergies?Those kind of Games are very common In Countries like China& India (where Company onwers tend to use Cash from Profitable enterprises to bail out loss making entities-often with disastrous consequences for all concerned and especially retail shareholders);but I have'nt heard many such major cases here in America.



  8. Ashu001
    July 31, 2012


    I am afraid I don't have much knowledge on that issue.

    You do realize though that some of TIs biggest competitors are based in Europe and Japan;so investor considerations are different there?

    I was just reading Infineon's latest results and they remain very hopeful for the rest of 2012-13.

    The consumer is holding up remarkably well(even in Austerity plagued Europe);while Government and Corporate Spending has slowed down dramatically this year.




  9. Taimoor Zubar
    July 31, 2012

    “I am very much in favor of a One-time Tax Holiday which permits most US Headquartered Companies to bring back most of their Overseas profits back to the US”

    @Ashish: I think that may be a good move but can this be a good move in the long-run? Given how easy it is for companies to shift cash around, what happens when the tax holiday ends? Do they look to take out the investment again to other countries? If that happens, it may end up hurting the economy more.

  10. Ashu001
    July 31, 2012


    If you look at the history of Tax holidays then the last time it was done was over a decade back.

    This has to be done on a one-time basis to bring cash back Onshore.

    You can't make it a regular practice.


  11. bolaji ojo
    July 31, 2012

    Ashish, You know the US has in the past granted company a “one-time” opportunity to repatriate foreign cash. I remember writing about it at the time because Microsoft used that opportunity to pay shareholders a special dividend that totalled $30 billion. Cisco also brought back some cash and so did many other American companies.

    What happened afterward? The companies began piling up cash overseas again. If the government agrees with your suggestion we'll start the cycle all over again. This time they should close the loophole or stop double taxation. If the money was earned overseas and had been taxed overseas don't tax it again at home until somebody goes out to splurge on themselves!

  12. ahdand
    July 31, 2012

    Sounds good but the money ? How willl it be aised ?

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