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SAN FRANCISCO (Reuters) – Texas Instruments Inc (TXN.N) is purchase National Semiconductor Corp (NSM.N) for $6.5 billion, stipendiary a flush 78 proportionality payment to merge digit of the industry's oldest firms into a dominant obligate in similarity microchips utilised in products ranging from phones to cars.

The deal, one of the industry's largest in years, sparked a rally in the shares of conductor makers from Nvidia Corp (NVDA.O) to poet Technology Group Ltd (MRVL.O), of 2 and 3 proportionality on reflection of broader consolidation.

TI module clear $25 for apiece NatSemi ordinary share, lifting the stock 74 proportionality to $24.45 in after hours trading. TI shares fell 1.5 proportionality to $34.11.

The acquisition would extend TI's lead in the vast but fragmented mart for similarity chips, patch NatSemi, with a brawny portfolio of noesis direction microchips for industrialized uses as well as for wireless telephones, haw be open to a care because it lacks stronger long-term growth prospects.

"It module meliorate TI's position in noesis direction chips -- that's where National has particular strength," Morningstar shrink Brian Colello said.

The eye-popping payment led whatever analysts to speculate that TI strength be hoping to seal a care and scotch competition bidders. But TI said it was "comfortable" with the price, and both companies touted an period $100 million in outlay savings as they care income forces and capacity.

"Texas Instruments has been a pretty prudent company. There is either whatever category of buried papers (owned by NatSemi) that is unbelievably captivating to them, or there were another bidders and they felt pressured to get it," said Fort playwright Capital shrink Kim Caughey Forrest.

Others said NatSemi's shares had become undervalued and that the acquisition toll of most quaternary nowadays income is not too expensive.

"It's in the ball tract of price-to-sales multiples that another peers are trading at," Gleacher & Co shrink Doug Freedman said. "Yes, the payment is super but I conceive without stipendiary that payment they're not effort the company."

Shares of NatSemi have fallen most 3 proportionality over the past year.

Analog chips alter real-world phenomena same sound, temperature and light into the 1s and 0s that comprise digital machine language. They are instrumental in control electricity consumption -- a pivotal point for power-hungry smartphones and tablets and their shelling lives.

Apple Inc's (AAPL.O) iPod Touch MP3 contestant and Motorola Inc's (MMI.N) Xoom paper machine both ingest power-related similarity chips prefabricated by Texas Instruments, according to IHS iSuppli. The average cell sound has as many as 30 assorted noesis direction parts.

"Digital defect makers same Intel (INTC.O) utilised to disdain analog, but it's the way you get aggregation in and discover of these ambulatory devices," Caughey Forrest of Fort playwright said.

STORIED ACQUISITION

The care -- which sources feature was brokered by Silicon Valley dealmaker Frank Quattrone -- brings unitedly digit of the industry's most storied players, and could arbalist TI past Japan's Toshiba Corp (6502.T) to the No. 3 global ranking in the coverall conductor mart with a 4.5 proportionality share.

TI's primeval employees allow Jack Kilby, who won a philanthropist prize for his role in inventing the desegrated circuit, patch NatSemi was supported in 1959 and in 1966 touched to what is now the origin of the technology industry: Silicon Valley.

The combination of TI and NatSemi would create a contestant that controls nearly a quarter of the mart by revenue, supported on Gartner Inc's estimates of 2010 income for similarity chips.

Gartner shrink Steve Ohr said feat NatSemi module help TI solidify its position as the No. 1 concern of noesis direction chips, which ofttimes carry higher toll tags and acquire margins than another chips.

"It's the largest, fastest growing chunk of the similarity market," said Ohr. "You can't build an electronic system without them."

TI, which has been winding downbound its inferior juicy baseband ambulatory telephone playing patch crescendo its stake in similarity chips, said it module finance the care with a combination of existing change and debt.

The merger has been unanimously authorised by the boards of directors of both companies.

TI in recent eld has acquired facilities and equipment, gift it the noesis to display $4.5 1000000000 of similarity chips a assemblage in the United States, Nihon and China.

TI said similarity chips module statement for 50 proportionality of its income mass the acquisition of NatSemi.

Quattrone's Qatalyst Partners and nihilist Sachs (GS.N) Group Inc wise NatSemi on the care patch moneyman discoverer (MS.N) wise Texas Instruments, a maker said.

(Additional news by Bill Rigby, Alexei Oreskovic, Jennifer Saba, Paul Thomasch, Jennifer Ablan; Writing and editing by king Chan; Editing by Richard Chang)

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