We applaud the strategic rationale of the deal, given Mobileye’s existing portfolio of computer vision products found in vehicles on the road today.
On March 13, Intel
announced it intends to acquire Mobileye
for approximately $15.3 billion to bolster its efforts in the burgeoning autonomous driving market. We applaud the strategic rationale of the deal, given Mobileye’s existing portfolio of computer vision products found in vehicles on the road today. As current technology progresses from basic advanced driver assistance systems (emergency braking, lane departure warnings, adaptive cruise control, and so on) to fully autonomous platforms, customers will require end-to-end solutions from the vehicle to the data center. While the joint entity will be better suited to address challenges associated with achieving self-driving cars, our initial reaction to the acquisition is that the expected synergies will be effectively offset by the 34% premium to the March 10 close that Intel is paying for Mobileye's shares. Still, the deal price of $63.54 per share represents a modest 16% premium to our $55 fair value estimate for Mobileye. Consequently, we are maintaining our fair value estimate of $31 for wide-moat Intel at this juncture.
Abhinav Davuluri is an equity analyst for Morningstar.
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.