8-KMaterial AgreementsRegulation FDOther Events+1

INTEL CORP 8-K Report, Material Agreement (Jun 4, 2024)

Filed June 4, 2024For Securities:INTC

Summary

Intel Corporation has announced a significant strategic transaction through its wholly-owned subsidiary, Intel Ireland Limited, entering into a purchase and sale agreement with AP Grange Holdings, LLC, an affiliate of Apollo Global Management. This agreement involves the sale of a 49% ownership interest in Grange Newco LLC, the entity that will house Intel's Fab 34 facility in Leixlip, Ireland, for approximately $11 billion. Intel Ireland will retain the remaining 51% ownership and full operational control of the facility, including all intellectual property. This deal is expected to close in the second quarter of 2024 and is crucial for Intel's strategy to secure external funding for its advanced manufacturing initiatives and capital-intensive projects. The transaction highlights Intel's efforts to optimize its capital structure and support its IDM 2.0 strategy by bringing in strategic partners for its fabrication assets. The limited liability company agreement outlines specific governance and operational aspects, including Intel Ireland's appointment of a majority of the board of managers and certain co-investor approval rights. Importantly, Intel Ireland will retain the right to call back the co-investor's stake and has a right of first offer if the co-investor wishes to sell its units. Ancillary agreements ensure Intel Ireland will continue to operate and maintain Fab 34, meeting minimum performance standards, and Intel itself commits to minimum wafer purchase obligations at manufacturing cost plus a margin, with penalties for underperformance. The substantial completion of Fab 34 is targeted for June 2026.

Key Highlights

  • 1Intel is selling a 49% stake in its Fab 34 joint venture (JV) in Ireland to an Apollo affiliate for approximately $11 billion.
  • 2Intel Ireland will retain a 51% ownership and maintain operational control of the Fab 34 facility.
  • 3The transaction is expected to close in the second quarter of 2024, subject to customary conditions.
  • 4The JV structure and ancillary agreements ensure Intel Ireland operates and manages the fab, while Intel commits to minimum wafer purchases.
  • 5Intel will retain all intellectual property rights associated with Fab 34.
  • 6Intel has call and right of first offer options related to the co-investor's stake, providing strategic flexibility.
  • 7The deal aims to bring in external capital to support Intel's advanced manufacturing roadmap and optimize its capital structure.

Frequently Asked Questions

The primary purpose of this transaction is to secure approximately $11 billion in external capital to fund Intel's advanced manufacturing initiatives, specifically for its leading-edge Fab 34 facility in Ireland. This aligns with Intel's IDM 2.0 strategy by bringing in a strategic partner to share the significant capital investment required for semiconductor fabrication.

No, Intel Ireland will retain a 51% ownership and, crucially, maintain operational control of Fab 34. Intel Ireland will appoint the majority of the board of managers for the JV company and will continue to operate and maintain the facility under defined performance standards. Intel also retains all intellectual property rights.

Intel has agreed to purchase wafers from the JV company for itself and/or third-party sales, with minimum volume commitments and pricing based on manufacturing cost plus an agreed margin. Intel will face penalties (liquidated damages) if it fails to meet these minimum volume commitments. Intel Ireland is also responsible for completing the construction and commissioning of Fab 34, with substantial completion targeted for June 2026.

Intel Ireland has significant future flexibility. It holds a call right exercisable approximately 7.5 years after Fab 34 is substantially complete, allowing it to buy back the co-investor's units. Additionally, Intel Ireland has a right of first offer if the co-investor wishes to sell its stake. The co-investor also has a conversion right to exchange its units for Intel shares after about 12.5 years.