Chip maker NXP Semiconductors has agreed to buy the smaller Freescale Semiconductor Ltd, merging operations in a deal valued at $40 billion.
The deal, which was announced late Sunday, will make NXP the industry leader in the auto and industrial semiconductor markets, according to Reuters.
The deal is the latest sign that the semiconductor businesses are regaining the confidence necessary to pursue major acquisitions and mergers while major clients like mobile phone manufacturers are trying to consolidate suppliers.
[quote text_size=”small” author=”– Richard Clemmer” author_title=”NXP Chief Executive Officer and CEO of the new company”]
We fully expect to continue to significantly outgrow the overall market.
[/quote]
Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP share for each share of Freescale. Freescale shareholders will own around 32% of the combined company. The deal puts Freescale’s value at $11.8 billion, with an enterprise value of $16.7 billion.
The deal is expected to close later in 2015. NXP will fund the deal with $1 billion in cash from its balance sheet, $1 billion of new debt, and nearly 115 million shares.
NXP, based in the Netherlands, operates in over 25 countries with a revenue of $5.7 billion last year. Texas-based Freescale also has operations in 25 countries with $4.6 billion in net sales last year.
Freescale dates back to 1948, when Motorola created a division in Arizona that became one of the first semiconductor businesses in the world. Most recently, Freescale has become known for its microcontrollers, car applications and networking and industrial equipment, according to the Wall Street Journal. Freescale also has chips in many consumer products, including the Amazon Kindle e-reader.
Both companies’ shares have rapidly increased over the last year as industrial companies have been designing more sensing and communication technology in equity to improve automation and gather data. Over the last twelve months, Freescale shares are up 59%, while NXP shares have gone up 51%, ABC News reported.
