SAN JOSE, Calif. Since its spin-off from Motorola Inc. in 2004, sleepy Freescale Semiconductor Inc. has prospered under the radar screen with relatively few mishaps and little or no fanfare.
But now, for better or worse, Freescale (Austin, Texas) has entered into the national spotlight with analysts now asking a simple question: Are the company's days numbered?
Doug Freedman, an analyst with American Technology Research Inc. (Greenwich, Conn.), on Tuesday (Sept. 12) upgraded Freescale's stock from a "Neutral" to a "Buy" rating, based on a potential bidding war between two rival equity firms for the chip maker.
"We are upgrading shares of Freescale based on a possible bidding war situation," Freedman said in a report. If or when Freescale ends up getting acquired by an equity firm, the chip maker could potentially be broken up into smaller pieces and sold off, he speculated.
It's been a wild week for the supplier of automotive ICs, communications chips, microcontrollers and other products. In a major surprise, a consortium of investment firms is close to finalizing a deal to buy Freescale for about $16 billion, according to a New York Times report published Monday (Sept. 11).
The consortium in talks to acquire Freescale includes Texas Pacific Group, Blackstone Group and Permira, with the possibility that the Carlyle Group and Bain Capital could also join the group, the report said.
The report went on to say that a second consortium comprising Kohlberg Kravis Roberts & Co. (KKR) and Silver Lake Partners had also submitted an offer for Freescale, but that the alternative bid looked unlikely to succeed because it may have been too little and too late.
Freescale declined to elaborate, but the chip maker said it was in talks regarding a "possible business transaction."
Besides the published reports, analysts outlined a number of future scenarios for Freescale. For example, some speculated that Motorola could even re-acquire Freescale in an effort to secure a future supply of chips.
The possibility of a deal to combine Freescale with the recently formed NXP is also in the background, although this is unlikely to happen, according to the report. KKR and Silver Lake Partners are part of a consortium that is acquiring an 80.1 percent stake in NXP,, formerly the semiconductor division of Royal Philips Electronics, for 3.4 billion euros (about $4.4 billion).
Still, there are other possibilities. "We see two possible scenarios ultimately for whoever ends up controlling Freescale," Freedman said. "One is that they will become a consolidator and begin buying other semiconductor companies they deem cheap or as having synergies in the wireless and network processor space; and the second is they will divide the wireless group and TSPG/NCS groups at Freescale apart and sell one to fund the expansion of the other."
By TSPG/NCS, Freedman was referring to Freescale's Transportation and Standard Products Group and the Networking and Computing Systems Group.