Intel, Israel sign multi-billion dollar reciprocal purchase agreement

The company will receive a grant of about $1 billion from the Israeli government for its investment plan, Kahlon said on Tuesday.

Prime Minister Benjamin Netanyahu meeting with Intel heads (photo credit: AMOS BEN-GERSHOM/GPO)
Prime Minister Benjamin Netanyahu meeting with Intel heads
(photo credit: AMOS BEN-GERSHOM/GPO)
US technology giant Intel Corp. will purchase over $4 billion of Israeli products and services over the next six years, the Economy Ministry announced Wednesday, just two days after the company agreed a record-breaking $11b. investment in its Israel-based operations.
 
The reciprocal purchase agreement signed by Intel and the ministry’s Industrial Cooperation Authority (ICA) is the result of conditions attached to a NIS 700 million ($190m.) grant announced by the government in December in return for a $5b. expansion of its Kiryat Gat operations.
 
On Monday, Finance Minister Moshe Kahlon announced that Intel would invest an “unprecedented” NIS 40b. (approx. $10.9b.) in the company’s Israel-based operations, significantly expanding its multibillion dollar presence in the country.
 
Intel is planning to use its largest investment in Israel to date to construct a vast production facility in the southern city of Kiryat Gat, creating an estimated 1,000 jobs.
 
Prime Minister Benjamin Netanyahu expressed his delight at the investment on Wednesday, as he welcomed Yaniv Garty, Intel vice president and Intel Israel general manager, to his office.
 
“I am proud that you are aware of the tremendous advantages offered by Israel, and I am proud that you are leading a truly extraordinary move from within the State of Israel,” said Netanyahu.
 
The company will receive a grant of about $1b. from the government for its investment plan, Kahlon said on Tuesday, and the ICA will enter into a further round of reciprocal purchase negotiations based on the latest grant.
 
“We will continue to insist that foreign companies fulfill their obligation for reciprocal purchases back from Israel industry,” Economy Minister Eli Cohen said.
 
Marking another possible investment in Israeli hi-tech, Intel has reportedly offered between $5.5b. and $6b. to acquire Israeli chipmaker Mellanox Technologies.
 
Citing unnamed sources familiar with the deal, Israeli financial daily newspapers said the multibillion dollar bid constituted a 30%-36% premium on Mellanox’s closing Nasdaq share price on Tuesday.
 
The Yokne’am-based company, founded in 1999, supplies end-to-end interconnect solutions and services for data center servers and storage systems.
In October, CNBC reported that Mellanox had hired a financial adviser to explore the possibility of a sale following takeover interest from at least two companies, including American technology company Xilinx.
 
Intel also announced this week that its exports from Israel in 2018 totaled $3.9b., an increase of $300m. compared to 2017, in addition to local procurement of materials and services – primarily in the periphery – worth $1.7b.