NXP Semiconductors and Freescale Semiconductor will merge into a $40 billion company, the two companies announced on Sunday.
NXP intends to fund its purchase of Freescale with $1 billion of cash from its balance sheet, $1 billion of new debt and approximately 115 million NXP ordinary shares.
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The purchase is part of NXP’s strategy to lead in the semiconductor business, combining the two large companies into the top American automotive semiconductor supplier, according to a press release from Freescale. The combined business is valued at just over $40 billion, with a combined revenue of more than $10 billion.
“Today’s announcement is a transformative step in our objective to become the industry leader in high performance mixed signal solutions,” said Richard Clemmer, NXP Chief Executive Officer. This is part of Freescale’s plan to “significantly out-grow the overall market,” he said. Clemmer will continue to be the president and chief executive officer of the merged company.
Gregg Lowe, Freescale Semiconductor president and chief executive officer, said that the merge would also accelerate Freescale’s strategic plans. “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,” he said.
The transaction was unanimously approved by the boards of directors of both companies. After the merger, Freescale shareholders will own approximately 32 percent of the combined company. Each shareholder will receive $6.25 in cash and 0.3521 of an NXP ordinary share for each Freescale common share held at the end of the transaction, as outlined in the agreement between the two companies.
The purchase price implies a total equity value for Freescale of approximately $11.8 billion (based on NXP’s closing stock price as of Feb. 27) and a total enterprise value of approximately $16.7 billion, including Freescale’s net debt.
NXP is based in Eindhoven, The Netherlands, while Freescale is based in Austin, Tex.
Filed Under: Industrial automation