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 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.
Based in Eindhoven, the Netherlands, NXP has operations in more than
25 countries and had revenue of $5.7 billion in 2014. Austin,
Texas-based Freescale also has operations in more than 25 countries
and had net sales of $4.6 billion in 2014.
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NXP's portable device and computer business is growing quickly, with
its revenue up 46 percent year-on-year to $712 million in 2014. But
its bigger automotive and chip identification businesses, which
together account for about half of its revenue, grew by only 12 to
13 percent.
Freescale reported adjusted earnings of $1.1 billion in 2014, up
from $893 million a year earlier.
Freescale went public in 2011 after being taken private in 2006 for
$17.6 billion in a leveraged buyout by a group of private equity
firms that included Blackstone Group LP, Carlyle Group LP, Permira
Advisers LLC and TPG Capital LP. The buyout firms still own 64
percent of Freescale.
Credit Suisse advised NXP, while Morgan Stanley advised Freescale.
(Additional reporting by Liana B. Baker; Editing by Greg Roumeliotis
and Kenneth Maxwell)
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