NXP Semiconductors NV (NXPI, Financial) is said to buy smaller competitor, Freescale Semiconductor, Ltd. (FSL, Financial). The combined transaction value hereafter will be a whooping $40 billion. This merger will create a leader in the industry of mixed signal semiconductors and auto markets. Once the deal gets through, shareholders of Freescale Semiconductor Ltd. will have an ownership of about one-third of the combined organization. The merger is expected to close during the early second half of 2015.
Company reckoner
Founded in 1953, NXP is one of the top 20 best semiconductor companies in the world. The company provides mixed signal and standard product solutions in the industry of semiconductors. The Dutch semiconductor manufacturer will take up Freescale, the American MNC based in Texas. Freescale currently holds the sixteenth position among the top semiconductor companies in the world.
Financials
NXP reported a $5,647 million revenue for the year 2014. The revenue for the last quarter 2014 was $1,537 million. This was a whooping 20% increment over the same period last year. The CEO of NXP, Richard Clemmer said that this high growth was a result of the company's strategy of offering differentiated product solutions. As compared to the semiconductor-giant NXP, Freescale made a comparatively less yearly earning. Freescale made net sales of $1.10 billion for the fourth quarter 2014 period. The Adjusted Earnings per share for the same period was 42 cents. The American company made net sales of $4.63 billion for the full year 2014. This was a 11% rise as compared to the year 2013. The shares of Freescale Semiconductor Ltd rose 59% last year while NXP shares rose 51%.
The deal
What may not be a known fact is that Freescale Semiconductors have their chips installed in the Amazon (AMZN, Financial) Kindles sold online across the globe. The company also manufacturers chips for industrial markets, automotive, networking and consumer markets. The deal pronounces that the shareholders of Freescale will receive a small premium in spite of the company's $11.1 billion market value. Freescale's debt will be paid and the adjusted deal thereafter will be valued at $16.7 billion. Boards of both the companies have given a go-ahead for the deal. Once the shareholders and regulators sign off, the deal will close during the second half of 2015. The combined company will make a saving of $200 million in the forthcoming year, and $500 million in the following next year. $1 billion of cash will be obtained from NXP's balance sheet to fund the deal. $1 billion will be in the form of debt and the remaining in the form of 115 million of shares.
Management talks
NXP Chief Executive Officer Richard Clemmer said that this merger will help the company in their goal of attaining the leadership position in the division of mixed signal solutions. This merger will help the company to tap high growth opportunities in future, he said. Also, efforts will be made to increase value for both the company's shareholders. Richard was also confident of outgrowing the market, obtaining high profits and generating more cash. CEO of Freescale also opined on the same words. He said the combination of the two complementary companies will help in providing maximum value for Freescale as well as NXP's shareholders. The combined size, global reach and scale of both the semi-conductor companies will help in delivering market growth above sustainable levels.
Other deals
The merger between NXP and Freescale is the fourth deal in the semiconductor industry in 2015. In February, Avago Technologies (AVGO, Financial) was all set to buy Emulex Corporation (ELX, Financial) for a deal valued at $600 million. MaxLinear, Inc (MXL, Financial) announced that it would buy Entropic Communications, Inc. (ENTR, Financial) for $287 million. Lattice Semiconductor Corporation (LSCC, Financial), in January closed a deal to buy Silicon Image, Inc. (SIMG, Financial) at a value of $600 million. It looks like 2015 is rife with mergers and acquisitions for the semiconductor industry. Let's wait to see other semiconductor companies that follow this trait.
