Company Press
Release:
STMicroelectronics and NXP Merge Wireless Businesses to
Expand Product Breadth and Boost Innovation
Combining complementary
organizations and portfolios will improve competitiveness, speed product
development and strengthen R&D scale
Geneva,
Switzerland, and Eindhoven, The Netherlands - April
11, 2008 –
NXP--the independent semiconductor company founded by Philips--and STMicroelectronics (NYSE:STM), a leader in delivering
advanced solutions for mobile products, today announced their agreement to
combine key wireless operations to form a joint-venture company with strong
relationships with all major handset manufacturers. The new company will have
the scale to better meet customer needs in 2G, 2.5G, 3G, multimedia,
connectivity and all future wireless technologies. The combined venture will be
created from successful businesses that together generated $3B in revenue in
2007 and will own thousands of important communication and multimedia patents.
The new company will be a solid top-three industry player and among the few
companies with the scale and expertise to pursue the R&D investments
necessary to establish itself as a leading player in the wireless and
mobile-multimedia market.
The new
organization will combine key design, sales and marketing, and back-end
manufacturing assets from both companies into a streamlined worldwide joint
venture that will rely on its parent companies and foundries for wafer
fabrication services. This new leading player will be well positioned with all
of the vital technologies for UMTS (Universal Mobile Telecommunication System);
for the emerging 3G Chinese standard; as well as other cellular, multimedia and
connectivity capabilities, including WiFi, Bluetooth,
GPS, FM Radio, USB, and UWB (Ultra-wideband), to effectively serve its global
customers with complete wireless and mobile solutions across the spectrum of
applications. The JV will also integrate the Silicon Laboratories’
wireless and GloNav’s GPS operations recently
acquired by NXP.
“The
strength of this venture is its excellent relationships with key customers, as
well as the complementary IP and product portfolios transferred from ST and NXP
that create a rich and broad offering with the capability to deliver
leading-edge innovations to the market,” said Carlo Bozotti,
President and CEO of STMicroelectronics. “The
JV’s strong positioning leads us to expect immediate and future top- and
bottom-line synergies for the exciting new enterprise and establishes a
powerful foundation to build on its parents’ 2G, 2.5G, 3G, multimedia and connectivity efforts. This combination will
form the basis of the success of the new venture.”
“The
wireless semiconductor industry requires huge investments in new technology and
innovative product roadmaps. This move will see two strong players propelling
themselves into a leadership position,” commented Frans
van Houten, President and CEO of NXP. “By
creating this joint venture, we put most of the competitors at a distance.
Together we will accelerate innovation which we anticipate will contribute to
market share gains and improved financial performance.”
Both parent
companies contribute strong businesses generating comparable revenue - each
with 2007 operating profit of approximately $100 million. In order to create a
clear ownership structure, STMicroelectronics will
take an 80% stake in the joint venture. NXP will receive $1.55 billion from ST,
including a control premium, to be funded from outstanding cash (cash and cash
equivalents balance for ST at year end 2007 were $3.5 billion). The new
organization is designed to be in a very healthy financial position, without
debt, and able to grow its business with all of the leading cellular handset
manufacturers. The parents have also agreed on a future exit mechanism for NXP’s ongoing 20% stake, which involves put and call
options, exercisable beginning 3 years from the formation of the JV, at a
strike price based on actual future financial results, with a 15% spread.
The new
company will be incorporated in the
The Joint
Venture will be governed by a board of Directors on
which both Carlo Bozotti and Frans
van Houten will participate, looking after the best
interest of its customers and the success of the JV. Aiming for a closing in Q3
of this year, the deal is subject to regulatory approvals and labor council
consultations.
The parent
companies expect over $250 million in annual cost synergies from the JV by
2011. In financial impact, ST expects the transaction to be accretive to its
non-GAAP cash EPS in 2009.
Commenting
on the impact to NXP, Frans van Houten
said, “This deal transforms the portfolio of NXP and strengthens our cash
position. We will continue to pursue building leadership positions through
innovation and investment in our remaining focus areas: Multimarket
Semiconductors, Automotive, Identification and Home electronics.”
“This transaction
strengthens our wireless business and enhances our leadership position in
an important market segment we have targeted for expansion and external
growth,” added Carlo Bozotti. “Coupled
with our recent deconsolidation of Flash memory, it further proves our
execution in reshaping ST’s product portfolio
towards value and leadership. This, together with our recently announced
decisions on distribution to shareholders, demonstrates our commitment to
improving shareholder value.”
According
to iSuppli, a market research firm, the global
handset market was 1.15 billion units in 2007 and is forecasted to grow at
about an 8% compound annual growth rate through 2011. The handset semiconductor market represented
14% of the global semiconductor TAM in 2007, making up the second largest
segment of the industry.
“The wireless semiconductor industry requires
consolidation,” said Jean-Francois Baril,
senior vice president of sourcing and procurement with Nokia. “We welcome
the emergence of this joint venture creating a strong player serving the top
mobile phone manufacturers, understanding the needs of these customers and
providing the required speed of innovation.”
Morgan
Stanley acted as exclusive financial advisor to STMicroelectronics
on this transaction and Allen
& Overy Amsterdam acted as legal advisor.
Merrill Lynch acted as exclusive financial advisor to NXP on
this transaction. De Brauw Blackstone Westbroek acted as legal advisor and ThinkFire
acted as advisor on all Intellectual Property matters.
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About STMicroelectronics
STMicroelectronics is a global leader in developing and
delivering semiconductor solutions across the spectrum of microelectronics
applications. An unrivalled combination of silicon and system expertise,
manufacturing strength, Intellectual Property (IP) portfolio and strategic
partners positions the Company at the forefront of System-on-Chip (SoC) technology and its products play a key role in
enabling today's convergence markets. The Company's shares are traded on the
New York Stock Exchange, on Euronext Paris and on the
Milan Stock Exchange. In 2007, the Company’s net revenues were $10
billion. Further information on ST can be found at www.st.com.
About NXP
NXP is a top 10
semiconductor company founded by Philips more than 50 years ago. Headquartered
in
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