NXP closes deal to buy Freescale and create top auto chipmaker

[December 07, 2015]  By Eric Auchard

FRANKFURT (Reuters) - NXP has closed its nearly $12 billion deal to acquire Freescale, doubling the proportion of auto-related revenue to 40 percent to create the world's top maker of automotive electronics, the company said on Monday.

Automotive unit Chief Executive Kurt Sievers said in an interview that the deal would allow NXP to assemble a range of discreet automotive applications into more complete systems running on top of Freescale processors. It propels NXP into new application areas in cars including powertrain, safety and body electronics, Sievers said, building on its existing leading positions in audio infotainment, security and vehicle networks. It aims to build security into key car systems to guard against hackers. The merger also bolsters NXP's position in other fast-growing chip markets, including wearable devices and health monitors, for example, while capitalizing on the company's strengths in security and payments.

The cash and stock deal, excluding debt, valued Freescale at $11.86 billion, based NXP's closing price on Friday. Freescale shareholders will own about one-third of the combined company.

One new product category NXP expects to develop using Freescale technology is a single integrated radar chip that it is betting will replace current ultrasonic radar systems used in advanced vehicle safety systems, posing a challenge to automotive chip specialist Elmos' existing ultrasonic chips.

A second product category will be multimedia processors that can allow NXP to expand its strong position in audio information systems into other areas of infotainment including video display dashboards.

NXP grew out of Dutch consumer electronics giant Philips, co-developer of CDs and DVDs, and also had historic roots in Silicon Valley. Freescale was spun out of cellphone and walkie-talkie pioneer Motorola.

Faltering demand in computer and phone markets, once semiconductor industry mainstays, have fueled a year-long merger wave as firms look to formerly unloved areas like auto electronics for sales growth.

(Editing by James Regan)

[© 2015 Thomson Reuters. All rights reserved.]

Copyright 2015 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.