BUSINESS

Freescale-NXP merger will create semiconductor powerhouse

Sue Doerfler
The Republic | azcentral.com

NXP Semiconductors' acquisition of Freescale Semiconductor, which has two metro Phoenix locations, is expected to create a powerhouse supplier in the automotive semiconductor industry.

NXP Semiconductors has acquired Freescale Semiconductor, which has two metro Phoenix locations. Here, a Freescale employee inspects equipment at the company’s Chandler site in 2009.

The $11.8 billion deal, which is projected to close during the second half of 2015, also could make the combined company a market leader in general-purpose microcontroller products, according to investment analysts.

Freescale, based in Austin, Texas, is a Motorola spinoff established in 2004 that has locations around the world. Locally, the two metro Phoenix sites, 2100 E. Elliot Road, Tempe, and 1300 N. Alma School Road, Chandler, have about 2,000 employees. Freescale manufactures microprocessors, sensors and other processing products used in the automotive, consumer, industrial and networking markets.

NXP, based in Eindhoven, the Netherlands, has locations in 25 countries and, according to Nasdaq, more than 27,000 full- and part-time employees. NXP CEO Richard Clemmer will serve as president and CEO of the merged company. NXP's products are used in wireless infrastructure, lighting, health care, industrial, consumer tech and computing.

"We believe this merger, which combines two highly successful and complementary companies, will create significant value for Freescale's and NXP's shareholders, customers and employees," said Gregg Lowe, Freescale's president and CEO, in a company statement. "Our combined scale, size and global reach will position our new company to deliver sustainable above-market growth."

The merged entity has a combined value of just over $40 billion and a combined revenue of more than $10 billion.

The deal, which has been approved by the boards of directors of both companies, is subject to regulatory approvals in various jurisdictions, closing conditions and approval of shareholders from both companies.

Under the terms of the deal, which was announced late Sunday and is structured as part cash and part stock, Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP ordinary share for each Freescale common share held at the close of the transaction.

Freescale trades as FSL on the New York Stock Exchange. NXP trades as NXPI on Nasdaq.

In a research note, analyst Doug Freedman of RBC Capital Markets said, "Given the structure of the deal, it does appear to be better to own the NXPI side of the equation as FSL shareholders receive 15-17 percent of their ownership in cash."

He also stated, however, that, "This could have been a winning exit for the sponsors of FSL, more so than the market may recognize."

At close Tuesday, Freescale's stock had risen to $40.47 per share from Friday's close of $36.13. NXP's stock, at $84.90 at close Friday, registered $98.71 at close Tuesday.

Reach the reporter at sue.doerfler@arizonarepublic.com.