LONDON – Freescale Semiconductor, the U.S. chip company that spun off from Motorola in 2004 and taken private by a private equity consortium in 2006, has filed for an initial public offering of common shares.
Freescale Semiconductor Holdings I Ltd. of Bermuda plans to sell 43,500,000 common shares at a price of between $22 and $24 per share, which would raise between $957 million and $1.04 billion. This would be about one fifth or sixth of the shares outstanding after the issuance of the shares.
Freescale has granted the underwriters a 30-day option to purchase up to an additional 6,525,000 common shares to cover over-allotments. The common shares have been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol FSL.
In 2010 Freescale made a net loss of $1.05 billion on net sales of $4.46 billion, according to a filing with the SEC. Freescale posted a net loss, including charges, of $148 million on net sales of $1.19 billion, in the first quarter of 2011.
Freescale said it would use the proceeds of the IPO together with cash on hand to repay an aggregate of approximately $1.1 billion in outstanding indebtedness. This also includes payments of of between $2.9 million and $$33.6 million to each to the private equity companies that took Freescale private; includinng Blackstone Management Partners, TC Group, TPG and Permira Advisors.
Kiran this is certainly true for a successful IPO. But an IPO is always a 2 edged sword; you might end up with an IPO where you cannot get the amount of money you hoped for, and then what…? It might be interesting to see what the owners do in such a case... If Freescale would have assets that cover all the debt (and they don’t) then the owners would still get the money back, so they would not care so much. In this case, the IPO is meant to cover a little bit the gap between the assets value and the total debt.
I really hope that this strategy will work out so that we have a competition on the silicon market..
IPO's are the latest trend among the many technology companies to come out with IPO. I encourage this since the companies like Free scale should have the support of consumer share holders to continue innovate better products for the future.
I like this staff a lot. We have some “investors” that buy a company. They do not take the company’s profit and split it so that the company can grow and invest further... no no no. They put a pile of debt on them and when the company cannot pay back due to crisis or don’t know what other events what will they do…? The investment guys don’t lose the money, only the pawns that invested blindly their pension.
Ryan and Singfast probably have it right. The investors have to cash out at some point, and Freescale has been making sales progress. So, try it and see what happens. Who knows where the industry will be in 2-3 years, especially if governments worldwide continue to run up unheard of deficits and their customers cannot buy enough?
A price which is a bit high IMO to be lapped up by investors. Freescale hasn't really come out with a rebound since it was taken private and with loses still in their balance sheet not sure how many woulod be enticed with this offer.
The IPO is to let the private equity firms get thier investment back. Private Equity loads the comapany taken over with debt. The semi industry is too unpredictable and the matrics used by PE when modeling the acquistion back in 2006 did not factor in the industry downturn from Q4-08 to Q4-09. The PE people felt the industry was now mature eneough and would not have a severe swing. Oppps!!
@caiogubel, I know it sounds a little unreal when the company wants to raise $1B to pay back $1B loan...but the company is clearly worth something, even if in debt...consdier any start-up (which some might argue Freescale can be considered one) that is losing millions and goes IPO when it gets close to profitability, not that much different...how much Freescale is worth, that is another story, a typical metric (if there are no profits) is annual revenue with P/S ratio varying from 1 to say 5 depending on the business in question...Kris
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