Freescale faces debt, IPO prices below range
By siliconindia   |   Thursday, 26 May 2011, 22:51 IST
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Austin, TX: Freescale Semiconductor Holdings an American semiconductor manufacturer had agreed to accept buyout firms near the peak of the private equity boom in 2006, raised a less-than-expected $783 million in its initial public offering on Wednesday. The chipmaker sold 43.5 million shares for $18 each, the company said. It had planned to sell the shares for $22 to $24 each. Freescale was taken private in 2006 in a $17.6 billion buyout by a private-equity conglomerate led by Blackstone Group LP and including Carlyle Group and TPG Capital LP. This deal which was the biggest leveraged buyout of a technology company has been described as the most unsuccessful deal because it left Freescale in massive debt, thereby challenging the company's ability to compete in the investment-intensive chip market. Texas Instruments Inc and STMicroelectronics NV competitors of Freescale. The IPO pricing implies a total equity valuation of about $4.3 billion for Freescale, based on its price and the company's expectation for 240 million shares outstanding after the IPO. On an enterprise value basis, which includes debt, Freescale will have an implied valuation of about $12 billion.While that is less than the value of the 2006 leveraged buyout deal, the private equity owners will have the opportunity to make more money through secondary share offerings at future dates. Freescale, whose chips are used in cars, cell phones and consumer products like Amazon.com kindle electronic reader, plans to use the IPO proceeds to pay off some of the $7.6 billion in debt it had on books in the first quarter, when a net loss of $148 million was posted. The major supplier of chips for entertainment systems, brakes, airbags in cars "The Austin", Texas company, plans to list on the New York Stock Exchange under the symbol "FSL". Citigroup and Deutsche Bank Securities led the underwriters on the IPO. On Tuesday, Applied Materials Inc, the world's top supplier of semiconductor manufacturing equipment, forecast net sales in its fiscal third quarter to be down 3 percent to 10 percent sequentially, saying concerns about a tough economy have led chipmakers to delay spending to expand capacity.