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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