Moody's Shifts TI Outlook to Negative on SLAB Deal

Moody's Revises TI Outlook Post-Acquisition News

Moody's Ratings has affirmed Texas Instruments' Aa3 senior unsecured rating but has revised the company's outlook from stable to negative. This change follows the announcement of TI's planned $7.6 billion acquisition of Silicon Laboratories.

Deal Overview and Financial Leverage

Texas Instruments will fund the acquisition with existing cash and approximately $7 billion in new debt, increasing its total debt by nearly 50%. Moody's projects this will raise TI's financial leverage from 1.8x to the upper 2x range of debt to EBITDA, a level considered high for its Aa3 rating.

Strategic Impact and Future Outlook

The acquisition is expected to bolster TI’s position in embedded wireless connectivity and add 1,200 products to its portfolio. TI anticipates achieving $450 million in cost synergies within three years post-closing. Despite the increased debt, Moody's expects TI's free cash flow to improve after 2026 as major manufacturing construction concludes.

Summary

The negative outlook reflects near-term financial pressure from the debt-funded acquisition. However, the deal offers long-term strategic benefits by expanding TI's product portfolio. The transaction is expected to close in the first half of 2027, pending regulatory and shareholder approvals.

FAQ

Q: Why did Moody's change Texas Instruments' outlook?
A: The change to negative is due to the significant increase in debt and financial leverage resulting from the planned $7.6 billion acquisition of Silicon Laboratories.

Q: What is the strategic goal of this acquisition for TI?
A: The acquisition aims to enhance TI's competitive position in embedded wireless connectivity and is projected to generate substantial cost synergies.

Source: Investing.com