FBR Maintains Outperform Rating and $40 PT On TXN After Announcement To Acquire NSM

FBR Capital Markets has published a research report on Texas Instruments

after the company announced its intent to buy National Semiconductor

for $25/share after yesterday's market close. In the report, FBR Capital writes, "We think this deal makes sense, with TI the only likely bidder and the best strategic fit for National Semi. The $6.5B purchase price, which TI will fund with about $3B of its own cash and about $3B-$4B of new debt, represents a P/E of about 19x (2011) and 17x (2012), not inexpensive considering National's growth rate, but likely not that expensive either considering the manufacturing synergies and cost reductions that TI is likely to achieve in coming years. Indeed, TI is now an even bigger analog competitor than before with TI and National combining to claim about 18% global analog market share, meaningfully ahead of closest peers Analog Devices (6%), Maxim (6%), Linear Technology (4%), and Intersil (4%). We do expect this deal to close without issue, and given the meaningful premium to National's close, and given the strong strategic fit with TI's business, we expect no other bidders to surface. Net, TI's acquisitions of National should be a solid opportunity for TI to build scale, grow its product offering, improve its manufacturing efficiencies, and accelerate EPS growth, all at a fair (but not inexpensive) price." FBR Capital maintains its Outperform rating and $40 price target on TXN. Texas Instruments and National Semiconductor closed yesterday at $34.11 and $14.07, respectively.