NXP, Freescale to merge

NXP Semiconductors N.V. (NASDAQ: NXPI) and Freescale Semiconductor, Ltd. (NYSE: FSL) have agreed to merge, with the former buying the latter for approximately $11.8 billion in stock and cash. With the assumption of Freescale's debt included, the total total value of the deal is approximately $16.7 billion, the companies say.

Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP ordinary share for each Freescale common share they hold. NXP plans to fund the transaction via $1.0 billion of cash on hand, $1.0 billion of new debt, and approximately 115 million NXP ordinary shares. When the transaction closes, a milestone the companies expect to reach in the second half of this year, Freescale shareholders will own approximately 32% of the combined company.

The companies assert the transaction will create a semiconductor giant with a combined enterprise value of more than $40 billion, with combine revenue greater than $10 billion. The company will have a significant market share advantage in automotive semiconductors and general purpose MCUs, NXP and Freescale assert. The combined company will also be positioned to chase opportunities in security, connectivity, and processing.

"Today's announcement is a transformative step in our objective to become the industry leader in high-performance mixed signal solutions," said NXP CEO Richard Clemmer, who will become president and CEO of the merged company. "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."

NXP expects the transaction is expected to be accretive to its non-GAAP earnings and non-GAAP free cash flow. The company anticipates achieving cost savings of $200 million in the first full year after closing the transaction, with what it called "a clear path" to $500 million of annual cost synergies.

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