Freescale Sold For Billions

The apparent winner of what became a bidding war for Freescale Semiconductor is a private equity consortium led by The Blackstone Group.

Embedded chip maker Freescale  announced today that it’s entered into a definitive merger agreement to be acquired by the consortium for $17.6 Billion. In addition to Blackstone, the consortium includes The Carlyle Group, Permira Funds and Texas Pacific Group,

After spinning off from Motorola in 2004, Freescale has achieved an increasingly larger footprint worldwide in several markets including automobiles and cell phones. In 2005, Freescale, based in Austin, TX, had sales of $5.8 billion. Kohlberg Kravis and Roberts, Silver Lake Partners and Texas Pacific Group are believed to be among the other firms bidding for Freescale.

This is the second huge chip deal in the past few months. 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.

Potentially, today’s news isn’t the final word on Freescale’s new owner. The merger agreement contains a provision under which Freescale may solicit alternative proposals from third parties during the next 50 calendar days. The company said that in addition, it may, at any time, subject to the terms of the merger agreement, respond to unsolicited proposals.

If the company accepts a superior proposal, a break-up fee would be payable by the company for an undisclosed amount.

Freescale has been at forefront of cutting edge chip research. This past summer it was the first company to offer an advanced memory technology, called MRAM, for commercial use.

Volume production of 4 megabit Magnetoresistive Random Access Memory (MRAM)  , a technology first developed by IBM  in the 1970s. Although more expensive than more traditional SDRAM Freescale said the advent of MRAM offers dramatic advances in power consumption and system performance that would be an asset to existing electronic products and potentially help in the creation of new kinds of products.

MRAM retains data even when the power is turned off and requires less electricity to store data bits. A PC properly enabled with MRAM, for example, would start up instantly.

In February, Freescale announced it had joined Power.org, the organization led by IBM to promote its Power architecture. Specifically, Freescale said it planned to work with IBM to develop a common instruction set and move the Power architecture in to a broader set of customer implementations.