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RealTime IT News

Is Freescale on The Auction Block?

A group of private equity firms reportedly has its sights on Freescale Semiconductors .

Freescale would only confirm it is "in discussions with parties relating to a possible business transaction," according to a statement.

The semiconductor maker, which split from Motorola in 2004, is being eyed by the same group involved in other multi-billion-dollar buyouts of chip companies.

"You have semiconductors going into many things," said Joe Wilcox, an analyst with JupiterKagan.

Freescale produces embedded chips for several markets, including automobiles and cell phones. Recently, the chipmaker became the first silicon fabrication plant to announce it would produce Magnetoresistive Random Access Memory (MRAM) chips allowing devices to perform better while conserving energy.

For potential buyers, the issue becomes the cost of building a new fabrication facility, which can come with more than a $2 billion price tag, increasing even more the lure of existing semiconductor firms.

But for Freescale, the lure isn't so much the solitary company, but its potential when combined with another chipmaker.

If Freescale were combined with the semiconductor side of Royal Philips Electronics , it could leapfrog from its third-place position in the market behind Texas Instruments , to second-place, said Alan Veghese, analyst with ABI Research.

While Freescale spokesperson Glaston Ford offered no details and said discussions do not guarantee an agreement, venture equity firms have played a large role in several recent semiconductor firm acquisitions.

The same names reportedly involved in talks with Freescale, including Kohlberg Kravis and Roberts, Silver Lake Partners and Texas Pacific Group, were also part of previous semiconductor purchases.

Ford would not confirm the equity firms named in the reports.

In early August, Kohlberg Kravis Roberts & Company, along with Silver Lake Partners and AlpInvest Partners outbid other investors, paying $4.5 billion for an 80 percent stake in Philips Semiconductor, part of Royal Philips Electronics.

Like Royal Philips, Agilent sold its semiconductor unit to private investors for $2.66 billion, allowing the Palo Alto, Calif., company to concentrate on its main business.

But the mother of all private equity tech buyouts could be the $11.3 billion paid in 2005 for financial software and transaction-processing company SunGard Data Systems.



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