McAfee Inc. (MFE) Soars on Acquisition News

Intel Corp. (INTC) announced Thursday that it agreed to buy security software maker McAfee Inc. (MFE) for $7.68 billion, or $48 a share in cash. The deal, the largest in Intel’s 42-year history, represents a 60 percent premium to McAfee’s Wednesday closing price of $29.93. The announcement prompted MFE to surge to $47.28, up more than $17.00, for the biggest rally in the S&P 500.

The boards of both companies said they have unanimously approved the deal.

The acquisition makes Intel a major player in the security software and services market. McAfee, which has enjoyed double-digit y/y growth and nearly 80% gross margins last year (McAfee reported a gross profit rate of 73.3% in its most recent Q), will become a wholly-owned subsidiary in Intel’s Software and Services Group. Intel, the world’s largest computer chipmaker, said the acquisition is part of its software and services strategy to deliver an outstanding computing experience in fast-growing areas, especially wireless mobility.

Announcing the acquisition as part of Intel’s transformation from a “PC company into a computing company,” Intel’s chief executive Paul Otellini said that security is now a fundamental component of online computing and will only grow as a concern for consumers and businesses.

“With the rapid expansion of growth across a vast array of Internet-connected devices, more and more of the elements of our lives have moved online,” Mr. Otellini said in a statement. “In the past, energy-efficient performance and connectivity have defined computing requirements. Looking forward, security will join those as a third pillar of what people demand from all computing experiences.”

The deal is expected to close after McAfee shareholder approval, regulatory clearances and other customary conditions specified in the agreement.

McAfee gained $17.15, or 57.30 percent, to $47.08 at 12:52 p.m. ET in New York Stock Exchange trading. Intel’s shares slipped 3.27% to $18.95, off 64 cents.

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