mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

Private Equity, NXP and Freescale.

Back in 2006 the semiconductor industry suffered a double shock as private equity reared its ugly head.

NXP was bought by KKR et al, and Freescale by Blackstone et al.

Both companies’ revenues were about the same but, in one deal NXP was valued at $10 billion and in the other Freescale was valued at $16 billion.

Now NXP has a market cap of $14 billion while Freescale’s  market cap is $6 billion.

The private equity stake in NXP is now under 15% while it’s 76% in Freescale.

When the private equity companies bought NXP and Freescale they loaded them up with huige debts.

NXP still has debt of $2.5 billion, Freescale has  debt of $6.39 billion.

Tags: freescale, Private equity, private equity companies, semiconductor industry

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4 Comments

  1. david manners
    March 11, 2014 06:51

    Well I like Rich Beyer, Mark, and think he’s a thoroughly decent guy who did a good job st Elantec and, especially, Intersil. The Freescale job I think was almost impossible because of the huge debt load the PE people imposed on the company, especially after it had been re-structured over and again for years after the spin-out from Motorola and before the IPO. I seem to remember the Federal Reserve Bank actually warning about the Blackstone deal back in 2006. So I think the survival of Freescale was a major achievement. I’ve never met Gregg though I used to talk to him on the phone when he ran the analogue business at TI.

    P.S. I’ve just found that warning in 2006 from the Fed. Dino Kos, who in 2006 was the manager of the Federal Reserve’s System Open Market Account, stated: ”LBOs are no longer being done solely in industries with predictable cash flows. Several deals were recently announced in volatile businesses such as semiconductors. The poster child for such deals is Freescale Semiconductor. The company was just acquired for $17.6bn. Cash flow barely covers interest payments, and the margin for error is very small for a company in a notoriously volatile industry.”

  2. Mark
    March 11, 2014 02:14

    David
    I never understood your respect for Rich Beyer. This guy never even bothered to move his home from California to Austin to run Freescale. He simply drove Freescale into the ground. They lost a lot of good engineers under his stewardship.

    Gregg Lowe is a hugely impressive leader. Freescale would follow Gregg into combat whereas Rich Beyer would be “fragged” at the first opportunity.

    As for AnotherDavid… ARM is just a way impressive architecture and Freescale’s Kinetis parts are extremely impressive. They both punch “way above their weight”.

    Mark

  3. david manners
    March 10, 2014 19:19

    I expect not, AnotherDavid, to put $9.6 billion of debt onto a $4 billion revenue semiconductor company just before a recession was insane. It’s a huge tribute to Rich Beyer that they survived at all.

  4. AnotherDavid
    March 10, 2014 16:37

    I am looking at using small ARM devices at the moment, and have this nagging issue about using Freescale. I don’t think I am alone!

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