Apollo shares rise on plans to invest $11 billion in Intel’s Ireland Fab joint venture By Investing.com

Shares in Intel Corporation (NASDAQ:) and Apollo (APO) rose following the Tuesday announcement that the latter will invest $11 billion to purchase a 49% equity stake in the joint venture, which is tied to Intel’s Fab 34, a leading-edge semiconductor manufacturing facility in Leixlip, Ireland.

APO shares climbed more than 3%, while INTC added 1% in Wednesday’s premarket trading.

This move is part of Intel’s second Semiconductor Co-Investment Program (SCIP), which is integral to the company’s Smart Capital strategy aimed at enhancing financial flexibility and accelerating its overall strategy.

Fab 34 is focused on high-volume production using Intel 4 and Intel 3 process technologies. Intel has already invested $18.4 billion in the facility and, through this transaction, aims to reallocate a portion of this investment to other areas of its business while maintaining the build-out of Fab 34.

The joint venture will secure the rights to manufacture wafers at Fab 34, ensuring a supply for Intel’s products and capacity for its foundry customers.

Intel will maintain a 51% controlling interest and keep full ownership and operational control of Fab 34 and its assets, the press release said.

“Intel’s agreement with Apollo gives us additional flexibility to execute our strategy as we invest to create the world’s most resilient and sustainable semiconductor supply chain. Our investments in leading-edge capacity in the U.S. and Europe will be critical to meet the growing demand for silicon, with the global semiconductor market poised to double over the next five years,” said David Zinsner, Intel CFO.

“This transaction allows us to share our investment with an established financial partner on attractive terms while maintaining our strong investment-grade credit rating.”

The investment is expected to be viewed as equity-like from a credit rating perspective, reflecting positively on Intel’s balance sheet. This strategic move is anticipated to provide Intel with capital at a lower cost than its equity cost.

The transaction’s completion is forecasted for the second quarter of 2024.

In their comments on the development, analysts said Intel’s joint venture with Apollo “provides enhanced capital flexibility” for the chipmaker.

“We believe Intel’s execution on its technology and product roadmaps will continue to dictate investor sentiment and that the agreement with Apollo will not necessarily drive any shift in near-term fundamentals,” they added.