The Destructiveness Of Private Equity
The scale of the destruction wreaked on NXP by its private equity owner KKR was further revealed in NXP’s Q2 results.
NXP’s Q2 statement says that the purchase price paid for 80.1% of NXP was $10.601 million. At last week’s IPO of NXP the market put a value of $3.490 million on the whole company, so valuing the 80% stake at $2.790 million..
NXP’s Q2 statement says that NXP’s debt, at the beginning of 2010, was $5.283 million and that was reduced by $1.331 million in 2009. So the debt at the beginning of 2009 was $6.614 million. That was loaded onto NXP by KKR to off-set its purchase cost.
In the NXP Q2 statement it says: ‘Our wafer factory in Caen, France was sold in June 2009, and our production facility in Fishkill, New York was closed in July 2009, and in January 2010 we closed parts of our front-end manufacturing facility in Hamburg, Germany. We have also initiated process and product transfer programs from our ICN5 and ICN6 facilities in Nijmegen, the Netherlands, which are scheduled to close in 2010 and 2011, respectively.’
Since KKR bought NXP its cumulative trading losses have been $5.5 billion.
Since KKR bought NXP R&D expenses as a proportion of revenues have declined from 19.6% to 11.4%.
Since KKR bought NXP, NXP’s employees have been reduced from 37,000 to 29,000.
When Philips Semiconductors was spun off from Philips it was re-named NXP, standing for Next eXPperience.
Although most of the chip industry feared the worst when KKR bought NXP in 2006, no one was expected that the next experience would be destruction on such a devastating scale.