Texas Instruments to Acquire Chip Maker Burr-Brown

Texas Instruments Inc., the leading maker of semiconductors for cellular phones, said Wednesday it plans to acquire Tucson-based chip maker Burr-Brown Corp. for $7.6 billion in stock.

Burr-Brown designs microchips that convert real-world sounds into the digital form computers can use and back again.

Burr-Brown’s data converters are used in applications such as new mobile phones designed for Internet access and data transmission as well as high-speed DSL modems, Internet audio players and consumer digital audio systems.

The acquisition will bolster Texas Instruments’ lead in the $22-billion market for analog chips, which are used to convert real-world sounds and images into the computer language used by modern digital devices.

“This should augment TI’s growth going forward,” said Christian Koch, an analyst with Trusco Capital Management in Atlanta, which owns about 9 million Texas Instruments shares. “This is a perfect fit for them.”

TI Chief Executive Tom Engibous said the acquisition will allow the company to provide a full range of analog chips used to exploit the abilities of digital signal processors (DSPs), which convert sounds into computer form for use by modern cellular phones and other devices.

“We are as serious about analog as we are about DSP,” Engibous said.

“This combination means that TI will have a leading position in essentially every high-performance analog category and the ability to offer almost any analog component that touches a DSP.”

Engibous said that acquiring Burr-Brown will launch TI on the fast track toward improving its line of analog chips.

“Burr-Brown’s product position accelerates our data-converter product road map by several years,” he said. “Together we will extend and expand the data-converter portfolio much faster than either company could alone.”

Dallas-based Texas Instruments said it would issue 1.3 shares of its own stock for each Burr-Brown share.

The deal values Burr-Brown shares at a 56% premium above their Wednesday close of $72.63.

TI ultimately will issue about 88 million shares of its stock to complete the deal, which the company expects to close in the third quarter. Excluding transaction costs, the acquisition is not expected to be material to TI’s earnings per share in 2000 or 2001, the company said.

TI’s shares ended trading on the New York Stock Exchange around $87 a share but fell as much as $4.88 to $82 in after-hours trading.

Burr-Brown Chairman, President and CEO Syrus Madavi said the deal will help create a stronger company with a wider range of products.

“TI’s strength in DSP will introduce our high-performance analog and data-converter products into new applications,” Madavi said.

He also stressed the advantages the merger will give customers of both TI and Burr-Brown.

“The makers of Internet appliances and communications systems will have the best of both worlds in one company, with complementary components to optimally meet their total signal-processing requirements. Our combined force of analog and DSP technical experts in the field will deliver unmatched support as our customers develop their systems.”

Burr-Brown is TI’s third acquisition in the last 12 months. It bought Unitrode Corp., a maker of power management semiconductors in October 1999 for about $1.2 billion.

In November, TI acquired Power Trends, a leading supplier of power management systems situated next to digital signal processors and microprocessors, for $145 million in TI stock.