SAN FRANCISCO—Freescale Semiconductor Inc. Friday (Feb. 11) filed with the U.S. Securities and Exchange Commission for an initial public offering in which it hopes to raise $1.15 billion.
Freescale (Austin, Texas), a onetime spinout from Motorola Inc., was a publicly traded company before it was bought for $17.6 billion in 2006 by a consortium of private equity firms led by the Blackstone Group.
In recent months, rumors have circled that Freescale was preparing to launch an IPO.
Freescale reported sales for 2010 of $4.46 billion, a 27 percent increase over 2009. The company reported a net loss for the year in accordance with generally accepted accounting principles of $1 billion.
According to the S-1 filing made with the SEC Friday, Freescale's underwriters for the IPO include Citigroup Inc., Barclays Capital, Credit Suisse, Deutsche Bank Securities and JP Morgan.
My guess is that Blackstone wants to test the market for an eventual sale of FSC, maybe Intel will want to buy it considering they haven't been succesful in the evergrowing embedded market, and considering the Mobile/Embedded market is filled with rocket fuel vs the PC market. Will chip makers split among the different mobile ecosystems? Sooner or later they will... and will then know who will buy FSC.
Some of the comments here seem to assume that the owners want to sell it because of the losses/debt.
Actually, it is the opposite: Blackstone bought Freescale shares at $40, then put the debt of the buyout on Freescale itself.
The company has been paying the debt of its own buyout back to Blackstone, therefore the red numbers, despite of being operationally profitable.
Now Blackstone will make even more money by selling its shares (1.5B just part of it, how much not disclosed).
These guys are smart, aren't they?
yalanand & daleste, you guys are missing an important detail regarding Freescale's history: Freescale went public, not private, when it was spun out from Motorola. The first IPO was in 2004, at $13/share on the NYSE. Two years later, a consortium of private equity companies bought the company for $40/share in a leveraged buyout.
The upcoming IPO will be the second time the company has gone public.
I feel Freescale has been encouraged by the recent growth of NXP's stocks on the market. They are probably hoping to replicate the same success.
I don't know how much of the company they are offering. Regardless, Freescale balance sheet looks pretty stinky. They have about $7.5b of debt but just over $4b in total assets (thus stockholders' equity is negative). They just paid about $950m in 2010 in interest and principal loan repayments. I don't know what they will do with the IPO money, but my guess is they will use it to pay off part of the $7.5b debt (the $1.5b will just go into the approx negative $5b equity blackhole). If they do, the debt goes down, but I estimate about $700m will still go down the drain as interest and loan payments in 2011.
Freescale could be a successful company - barring the huge debt on their books. They are growing their sales and the gross margin is good. The private equity buyout destroyed the balance sheet of an otherwise healthy company.
Private equity and LBO activities can sometimes wreck the balance sheets of companies. There is need for more government regulation in this regard.
Now the company hopes to transfer toxic assets to unsophisticated investors in their IPO.
Read the S-1 here:
The S-1 is grossly incomplete and it says:
"The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Dated February 11, 2011"
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