Tower Soars After Israel Backs $250 Mln Grant for Chip Factory
10/10/00 10:28:00 AM
Source: Bloomberg News
Tel Aviv, Oct. 10 (Bloomberg) -- Tower Semiconductor Ltd. shares rose as much as 23 percent after Israel's Finance Ministry approved a $250 million grant to help build a $1.3 billion plant to make chips for digital cameras and music players.
Tower, which makes chips to customer specifications, jumped $2.44 to $21.06 in early afternoon trading in the U.S. after reaching 23. The plant, which will be located at Tower's northern Israel headquarters in Migdal Ha'Emek, will employ about 1,000.
''It is clearly a significant positive for the company,'' said Quinn Bolton, an analyst at CIBC World Markets who has a ''buy'' rating on the company. ''This is the last area of concern regarding financing'' for the plant.
The grant is also expected to help Tower attract investors to kick in another $150 million to finance construction. The company has said the plant could help increase sales 10-fold to $700 million in the next five years.
''The plant was not possible without this kind of grant,'' said Co-Chief Executive Yoav Nissan-Cohen. ''Some of the other potential investors that we are negotiating with waited to get a green light from the government.''
Tower has already raised $75 million each from Santa Clara, California-based Alliance Semiconductor Corp. and Sunnyvale-based Sandisk Corp. The companies plan to produce memory chips for computer and telecommunications network products at the plant.
Tower is in talks with three other potential investors and expects to finish negotiations by the end of November, Nissan- Cohen said.
The company, which is controlled by holding company Israel Corp., is also seeking about $550 in loans to help build the plant, which is expected to start production in 2002.
Toshiba Corp., the No. 1 notebook maker, has invested about $10 million in the project and will provide expertise to help Tower make more efficient 0.18 micron chips.
According to terms of the government grant, Tower will get $180 million over the next two years, and the balance in 2003 and 2004. |
