Wednesday, April 9, 2008

STMicroelectronics and NXP Merge Wireless Businesses

NXP -- the independent semiconductor company founded by Philips -- and STMicroelectronics agreed to combine key wireless operations to form a joint-venture company serving handset manufacturers. The companies said their joint effort will have the scale to better meet customer needs in 2G, 2.5G, 3G, multimedia, connectivity and all future wireless technologies. It will rank as a top-three industry player, with combined revenue of $3 billion in 2007.

The new organization will combine key design, sales and marketing, and back-end manufacturing assets from both companies into a streamlined worldwide joint venture that will rely on its parent companies and foundries for wafer fabrication services. The joint venture's core technical competencies include UMTS, the emerging 3G Chinese standard, WiFi, Bluetooth, GPS, FM Radio, USB, and UWB (Ultra-wideband). The JV will also integrate the Silicon Laboratories' wireless and GloNav's GPS operations recently acquired by NXP.

STMicroelectronics will take an 80% stake in the joint venture. NXP will receive $1.55 billion from ST, including a control premium, to be funded from outstanding cash (cash and cash equivalents balance for ST at year end 2007 were $3.5 billion). The parents have also agreed on a future exit mechanism for NXP's ongoing 20% stake, which involves put and call options, exercisable beginning 3 years from the formation of the JV, at a strike price based on actual future financial results, with a 15% spread.

The new company will be incorporated in the Netherlands and headquartered in Switzerland with approximately 9,000 employees worldwide. The JV will operate its own very competitive assembly and test facilities in Calamba, Philippines and Muar, Malaysia. NXP's Calamba site as a whole will be transferred to the JV. In addition, part of ST's back-end operations in Muar will be separated from the parent company's existing facility in the area and transferred to the JV.

  • In February, NXP Semiconductors and Thomson have agreed to combine their can tuner modules operations in a joint venture. Thomson will appoint the CFO of this new venture, while NXP will appoint the CEO. NXP and Thomson expect that the definitive joint venture agreements will be finalized and the transaction will close in Q2, subject to closing conditions, including social and regulatory approvals.

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