NXP Semiconductors and Freescale Semiconductor have entered into a definitive agreement under which NXP will merge with Freescale. The transaction values the combined enterprise at just over $40 billion.
THE MERGER CREATES A MIXED SIGNAL semiconductor industry leader, with a combined revenue higher than $10 billion. The merged entity will become the market leader in automotive semiconductor solutions and the market leader in general purpose micro-controller products. The transaction is expected to be accretive to NXP non-GAAP earnings and non-GAAP free cash flow. NXP anticipates achieving cost savings of $200 million in the first full year after closing the transaction, with a clear path to $500 million of annual cost synergies.
Under the terms of the agreement, 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. The purchase price implies a total equity value for Freescale of approximately $11,8 billion (based on NXP’s closing stock price as of February 27, 2015) and a total enterprise value of approximately $16,7 billion including Freescale's net debt.
“Today’s announcement is a transformative step in our objective to become the industry leader in high performance mixed signal solutions. The combination of NXP and Freescale creates an industry powerhouse focused on the high growth opportunities in the smarter world. We fully expect to continue to significantly out-grow the overall market, drive world-class profitability and generate even more cash, which taken together will maximize value for both Freescale and NXP shareholders,” said Richard Clemmer, NXP Chief Executive Officer. Mr. Clemmer will continue to be the President and Chief Executive Officer of the merged company.
“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,” said Gregg Lowe, Freescale Semiconductor President and Chief Executive Officer.
The transaction is expected to close in the second half of calendar 2015. NXP intends to fund the transaction with $1 billion of cash from its balance sheet, $1 billion of new debt and approximately 115 million NXP ordinary shares. Post transaction, Freescale shareholders will own approximately 32 % of the combined company.
The transaction has been unanimously approved by the boards of directors of both companies and is subject to regulatory approvals in various jurisdictions and customary closing conditions, as well as the approval of NXP and Freescale shareholders.
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