Freescale and NXP to form $40bn firm

BY Richard Summerfield       

NXP Semiconductors N.V. and Freescale Semiconductor Ltd this week announced a $16.7bn merger, including the assumption of debt, which will create a firm with a total enterprise value of $40bn.

Under the terms of the deal, NXP will pay $6.25 in cash and 0.3521 shares of NXP stock for each share of Freescale stock. In a statement announcing the transaction, NXP confirmed that the deal will be funded with $1bn in cash and a $1bn debt offering, in addition to around 115 million new NXP shares.

“Today’s announcement is a transformative step in our objective to become the industry leader in high performance mixed signal solutions. The combination of NXP and Freescale creates an industry powerhouse focused on the high growth opportunities in the Smarter World. We fully expect to continue to significantly out-grow the overall market, drive world-class profitability and generate even more cash, which taken together will maximize value for both Freescale and NXP shareholders,” said Richard Clemmer, NXP’s chief executive officer in a statement announcing the deal.

The deal will create an industry heavyweight with about $10bn in annual sales. The largest producer of analogue chips, microcontrollers and other types of semiconductors, Texas Instruments, had sales of around $13.05bn in 2014.

Although the deal has been unanimously approved by the boards of directors of both companies, it is still subject to regulatory approvals in various jurisdictions and customary closing conditions. The deal, expected to close in the second half of 2015, must also be approved by shareholders. Once the merger has been completed, Freescale’s shareholders will own around 32 percent of the new firm. NXP’s stockholders will hold the remaining 68 percent.

The transaction will see a conglomerate of private equity investors, including Permira, Blackstone, Carlyle and TPG Capital, complete a partial exit of Freescale, acquired by the consortium in 2006 for $17.6bn. The group currently owns 64 percent share of Freescale. Once the deal has been finalised, the private equity firms will still hold around 19.1 percent of the merged company.

News: NXP to buy Freescale Semiconductor to create $40 billion co

“Challenging” Latin American investment environment highlights private equity value

BY Fraser Tennant

Latin American economies experienced a “challenging” 2014 with decreasing foreign demand, falling commodities prices and a reversal of asset flows back to developed markets contributing to an economic slowdown that significantly impacted the region’s private equity activity.

Data presented and analysed in ‘Private equity roundup for Latin America’ - the latest in EY’s series of private equity reports examining fundraising, investment activity and exits across a range of developing economies – shows that although total deal value increased marginally to US$4.3bn in 2014, the number of PE transactions actually fell by 18 percent to 76 (101 deals totalling US$4.5bn took place in 2012).

Despite these figures, the report does not suggest that investors are looking to withdraw from the region. On the contrary, many investors appear to be increasing their commitments with fundraising increasing by 73 percent over 2013 to US$9.0bn with nearly 60 firms in the region said to be actively fundraising.

“It is a maxim of private equity that many of the best deals are made during the worst of times," observe the authors of the ‘Private equity roundup for Latin America’ report. “While the current downturn in certain sectors of Latin America’s economy hardly qualifies as the 'worst of times,' clear dislocations continue to make the operating environment increasingly challenging. Despite this, the industry has yet to see an exodus of capital. Indeed, fundraising figures and LP surveys confirm that investors continue to fund new vehicles and are maintaining or increasing their commitments.”

Although overall growth in Latin America has slowed, there are significant differences between individual countries – Mexico and Brazil in particular, the region’s two largest economies. The IMF expects Mexico’s economy to grow by 3.5 percent in 2015 and Brazil’s by 1.4 percent.

In terms of regulatory impacts, Latin America still has a long way to go, such as dealing with security issues and corruption, but structural reform programs are underway.

For Latin America the current environment is a challenging. However, the EY report does highlight the “compelling” value of private equity, offering as it does the “operational expertise and financial discipline to help savvy entrepreneurs weather macro headwinds".

Overall, investment is encouraged and positive outcomes are expected in Latin America.

Report: Private equity roundup Latin America

PE hungry for energy assets

The energy sector is a key target for private equity (PE) , which has proved a major source of investment since the economic downturn. Almost half of executives expect to invest in energy during the next year, with a particular interest in oil and gas assets. North America remains a key region, although other geographies are expected to benefit from private investment. East and West Africa, and Latin America have befitted as the emerging markets have developed, and unconventional exploration is boosting opportunities in Europe and Asia.

FW spoke to Stefanie Fleischmann at Beowulf Energy LLC, Andy Brogan at EY and Douglas Nordlinger at Skadden, Arps, Slate, Meagher & Flom LLP about opportunities for PE presented by the energy sector.

TalkingPoint: Private equity in the energy sector

LatAm PE down but optimism high

BY Matt Atkins

Latin America focused private equity (PE) invested and raised a lower amount in 2013 than in previous years, according to a new EY Report. However, amounts remained well above 2009 levels.

PE faces a much more challenging environment in Latin America than in previous years, says the ‘Great expectations: what’s next for Latin American private equity?’ report. GDP growth forecasts have been lowered for many of the region’s biggest economies, and high inflation remains an issue. However, the region’s continued development means PE activity is significantly higher than a decade ago.

The biggest story of 2013 was the strength of Latin American IPO markets. Exits via IPO in EY’s study sample doubled, and 38 percent of IPOs in the region were PE-backed – the highest level ever recorded. The trend looks set to continue through 2014. Exit by IPO is by far the most common route to realisation for Latin America’s larger PE portfolio companies, with trade sales predominant in sub-$100m deals. However, as the barriers to going public are coming down, particularly in Brazil, this longstanding divergence is narrowing.

While secondary buyouts were expected to increase, they have remained relatively rare. In EY’s study, only a tenth of deals exited from the sub-$100m category were sold to other PE houses. The report predicts this proportion will grow as smaller houses work more closely with portfolio companies.

EY reports that PE is exploiting opportunities in a diverse range of sectors. The consumer goods and services sector accounted for nearly a third of realisations in 2013, followed by financials and technology. These three sectors benefited from growing consumer demand and overall economic development in the region.

Regarding triggers for exit, in 2013, strong business performance accounted for nearly 50 percent of exits. Favourable market conditions were a timing trigger in just over a third of exits. Overall, says EY, this suggests that PE owners in Latin America have an eye on exit. Their preparation is paying off, with exits via sales to trade buyers and IPOs both showing strong multiple returns.

Report: Great expectations: what’s next for Latin American private equity?