Freescale Semiconductor (FSL) to be Acquired by NXP in $11.8B Deal
Shares of Freescale Semiconductor Inc. (FSL) were trading up +3.40 or +9.42 percent to $39.51 per share in Monday's premarket after news late yesterday that NXP Semiconductors (NXPI) will be taking the company over for $11.8 billion in cash and stock. Freescale Semiconductor stock closed at $36.11, up +0.14 or +0.39 percent in Friday's regular trading session.
Eindhoven, the Netherlands based NXP Semiconductors was founded in 1953 as part of Phillips and was formerly known as Phillips Semiconductors. The company was subsequently spun off of the parent company in 2006 and had its initial public offering in August of 2010 listing on the Nasdaq under the symbol NXPI. The company offers semiconductors based on RF or radio frequency, analog and digital processors and is the leader in High Performance Mixed Signal electronics used in the mobile, automotive and identification industries. NXP operates in 25 countries and had revenue of $5.6 billion in 2014.
The combination of the two companies will create a powerhouse in the high performance mixed signal semiconductor industry with a combined value of more than $40 billion. The combined company is expected to have revenue of more than $10 billion and will become the leader in general purpose microcontroller and automotive semiconductor products.
The terms of the agreement will have Freescale shareholders receive $6.25 in cash and 0.3521 of an NXP ordinary share held at the closing of the transaction, which comes to approximately $11.8 billion. Based on Freescale stock's Friday closing price, the total enterprise valuation of the company is about $16.7 billion including Freescale's outstanding debt.
Freescale Semiconductor President and Chief Executive Officer, Gregg Lowe said that, "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. Both companies have built leadership positions and have a sharp focus on delivering superior value to customers. Our combined scale, size and global reach will position our new company to deliver sustainable above market growth. It will also serve to accelerate the strategic plans both companies have invested in, enabling us to deliver more complete solutions to customers".
NXP will finance the deal with $1 billion in cash from its balance sheet, $1 billion from the issue of new debt and about 115 million ordinary shares of the company. NXP expects to achieve cost savings in excess of $200 million in the combined company's first year, leading to as much as $500 million in annual cost saving synergies. The deal was unanimously approved by the boards of both companies and is expected to close by the second half of the 2015 calendar year.
Investors are showing their approval for the deal, with NXP stock up +12.32 percent to $95.35 per share, while Freescale Semiconductor stock is up more than +9 percent in this morning's premarket.
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