Would An Intel-Altera Merger Be Good For Shareholders?

In a report published Monday, Citigroup analyst Christopher Danely commented on reports that Intel Corporation (NASDAQ: INTC) is in negotiations to acquire Altera Corporation (NASDAQ: ALTR).

"We believe the acquisition would be positive for Intel and Altera's competitor, Xilinx," Danely wrote. "However, we believe the benefits to Intel and Xilinx are outweighed by the headwinds facing both companies."

Danely continued that an acquisition would be a positive for Altera stock, but negative for its business given Intel's recent execution issues with its foundry. On the other hand, an acquisition would be "slightly positive" for Intel since Altera's business is high-margin and grows faster than the overall semi sector.

Related Link: Intel-Altera Deal 'Makes Sense,' Intellectual Property Not 'Fairly Valued'

The analyst also noted that no terms were announced but if Intel acquires Altera at Friday's closing price of $44.39, it equates to a roughly $13.6 billion deal. Assuming Intel uses debt of roughly $12.0 billion at 3.0 percent, operating synergies of 20 percent and Intel's tax rate of 27.0 percent, the deal is estimated to be accretive to Intel's earnings per share by $0.06.

Bottom line, even if a merger goes through the analyst won't change his Neutral stance on Intel, Altera or Xilinx.