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More Freescale-NXP merger details revealed

Posted: 27 Apr 2015 ?? ?Print Version ?Bookmark and Share

Keywords:acquisition? Freescale Technology Forum? Internet of Things? merger?

After revealing record growth in product revenues and market shares for the first quarter, Freescale Semiconductor CEO Gregg Lowe discussed in greater detail the company's upcoming merger with NXP Semiconductors.

The Dutch giant!with more than 27,800 employees in over 20 countries!is scheduled to complete the acquisition of Austin, Texas-based Freescale!17,000 employees!before the end of this year.

For any company, this sort of mega-merger is no cakewalk. However, the two companies have been moving fast since the acquisition was announced only seven weeks ago.

Lowe reported that preparations are already under way at each company for the integration. NXP named two people, while Freescale assigned Karen Rapp, Freescale's vice president and chief information officer, to manage the process.

NXP-Freescale

In addition, the companies designated about a dozen people to "determine work streams and tasks with a clear objective to lay the groundwork," Lowe said. "Both Rick Clemmer [NXP CEO] and I are very pleased with the progress."

Asked about the magnitude of tasks involved, Lowe told us, "At a higher level, we've encountered no big problems thus far. But I am sure there will be a million little things both companies need to sort out."

Lowe acknowledged that transactions like this create a lot of anxiety. "Based on my own experience in acquisitions, uncertainty tends to subside, as decisions are made and announced."

He noted that the new senior management team that will report to NXP CEO Clemmer was already announced to all employees worldwide both at NXP and Freescale. As the organisation solidifies, a cascade of additional announcements will follow, he added.

The prospect of becoming a part of NXP is generating excitement among Freescale's 17,000 employees and customers, said Lowe. NXP is approaching the integration with "high energy, positive enthusiasm and clarity in purpose ... I'm very impressed with them," he added.

Engaged in talks with six companies

So far, both NXP and Freescale appear to find each other like-minded partners who have been around the block, even if they're not exactly long-lost brothers.

The Form F-4 that the companies filed at the U.S. Securities and Exchange Commission (SEC) reveals that NXP wasn't alone as a merger candidate. Five companies!Company A, Company B, Company C, Company D and Company E!were involved in talks with Freescale, during a span of almost eight months leading up to the final agreement. Some companies came directly to Freescale's management to inquire about the possible sale of Freescale, while others were contacted by Freescale.

Freescale was first contacted by Company A as early as last July for potential sale.

The document also describes the long-running relationship between NXP and Freescale, with the companies involved in discussions from time to time over the past several years. They talked about the companies' businesses and the potential for a combination. Formal discussions between top management teams didn't start until last December, the document says, after Company B and Freescale had already engaged in initial due diligence meetings in the fall.

Company C and NXP were the two who remained in talks with Freescale almost until the end. Company C decided to drop out of the race on Feb. 28.

Company C could have been Avago.

Reuters identified last month Avago as a company in pursuit of Freescale until late February. However, the rise in Freescale's share price made the acquisition too expensive for Avago, the report said. Quoting people familiar with the talks, the report said that Avago "identified fewer synergies than NXP did, and was betting on cutting costs and divesting some of Freescale's less profitable assets to make the deal work."

In an interview with EE Times when the acquisition was announced, NXP's Clemmer told EE Times that NXP's acquisition of Freescale is strategic, "not the tactical deals Avago likes to make."

Judging from what Clemmer and Lowe have said thus far, it's clear the NXP and Freescale felt an affinity. The two share a similar heritage (NXP coming Philips, Freescale from Motorola) and history (both companies bought by private equity funds), Lowe observed.


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