NXP to buy Freescale, create $40 billion company

Mon Mar 2, 2015 5:49am EST
 
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By Nadia Damouni and Suzanne Barlyn

NEW YORK (Reuters) - Chip maker NXP Semiconductors NV has agreed to buy smaller peer Freescale Semiconductor Ltd and merge operations in a deal valuing the combined company at over $40 billion.

The deal, announced by the pair late on Sunday and first reported by Reuters, will make the business the industry leader within the auto and industrial semiconductor markets.

The transaction is the clearest sign yet that semiconductor companies are regaining the confidence required to pursue big mergers and acquisitions at a time when their major clients, such as mobile phone manufacturers, seek to consolidate suppliers. Freescale also has its chips in consumer products such as Amazon's Kindle e-reader.

The deal is the fourth semiconductor sector M&A deal this year, and the biggest of these by far.

Last month, Avago Technologies said it would buy wireless networking company Emulex Corp for more than $600 million, while MaxLinear said it would buy Entropic Communications Inc for $287 million. In January, Lattice Semiconductor said it would buy Silicon Image for $600 million.

"Financially this deal make sense. By being bigger you limit the impact of the product cycles and volatile end markets," said RBC analyst Doug Freedman.

Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP share for each Freescale share. The purchase price puts Freescale's value at $11.8 billion, with a total enterprise value of $16.7 billion including debt.

The companies expect the deal to close in the second half this year. NXP will fund the transaction with $1.0 billion of cash from its balance sheet, $1.0 billion of new debt and about 115 million of its shares. Freescale shareholders will own about 32 percent of the combined company.   Continued...

 
The logo of Freescale Semiconductor Inc is seen at the entrance of the plant in Toulouse, southwestern France, April 24, 2009. REUTERS/Jean-Philippe Arles