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2 Groups Said to Bid for Freescale

Equity firms reportedly offer $16 billion for the chip maker. One team may see synergy with its Philips acquisition.

September 12, 2006|From Reuters

NEW YORK — Two groups of private equity firms are bidding to buy Freescale Semiconductor Inc. for about $16 billion, sources said Monday.

If completed, the acquisition would be the technology industry's largest leveraged buyout ever.

The company confirmed Monday that it was in talks about a possible transaction and said the outcome was uncertain. Freescale -- whose shares gained $6.31 to close at $37.06 after soaring as high as $37.18 -- did not identify the bidders.

Sources close to the matter said a consortium consisting of Blackstone Group, Carlyle Group, Permira Advisors and Texas Pacific Group was bidding for the company, which makes chips used in cellphones, computer networks and automotive applications.

Apax Partners, Bain Capital, Kohlberg Kravis Roberts & Co. and Silver Lake Partners made up the other consortium, another source said. Two other sources said the latter group was in the lead.

That group represents four of the five firms involved in the recent purchase of a majority stake in the chip unit of Philips Electronics.

A source familiar with the matter said the KKR group was considering linking Freescale with the Philips chip unit it controls.

"This could potentially be Part 2 of a combination process between Freescale and Philips," said Deutsche Bank analyst Ross Seymore, who noted that the companies could be a good fit because both operate in the wireless and automotive chip markets.

A buyer would probably continue the cost cutting at Freescale, which has improved its profitability by shaving costs since its spinoff from Motorola Inc. in 2004, Seymore said.

A $16-billion deal would provide about a 22% premium over Freescale's closing price Friday.

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