IPO Watch: Freescale Value Around $5.6 Billion (FSL, BX)

Freescale Semiconductor Holdings is closer to its IPO.  It has now set the initial terms for the initial public offering and it plans to trade under the ticker “FSL” on the New York Stock Exchange.

The chip-maker has noted a sale of 43.5 million shares and the suggested price range is $22 to $24 per share of common stock.  Freescale’s IP and customer is massive, as it claims approximately 6,100 patent families and serving over 18,000 customers through its direct sales force and distribution partners.

The underwriting group is massive.  The firms named in the underwriting syndicate are Citi, Deutsche Bank Securities, Barclays Capital, Credit Suisse, and J.P. Morgan.  Additional co-managers listed in the prospectus are Goldman Sachs, RBC Capital Markets, UBS Investment Bank, Sanford C. Bernstein, Gleacher & Company, Oppenheimer & Co., Pacific Crest Securities, and Piper Jaffray.  The company has also granted the underwriters a 30-day option to purchase up to an additional 6,525,000 common shares from us to cover overallotments.

If you will recall, Freescale was taken private in a private equity buyout with funds from affiliates of Blackstone Group LP (NYSE: BX), Carlyle, Permira, TPG, and others.

The company intends use the net proceeds and its cash on hand to pay down $1.1 billion in outstanding debt.  The company also plans to pay approximately $4 million in fees and expenses in connection with its senior credit facilities amendment and to make a payment to its private equity sponsors in connection with a termination of the management fee agreements as follows:

• $33.6 million to Blackstone Management Partners V L.L.C.,
• $10.8 million to TC Group IV, L.L.C.,
• $6.5 million to Permira Advisors (London) Limited,
• $6.5 million to Permira Advisers LLC,
• $6.7 million to TPG GenPar V—AIV, L.P.
• and $2.9 million to TPG GenPar IV—AIV, L.P.

If the overallotment option is exercised in full, then it will have some 246,320,161 shares outstanding.  At the mid-point of the range of $23.00 per share would give it a market cap of roughly $5.66 billion.

Freescale agreed to go private for some $17.6 billion, if you include its debt, in late-2006 in what was the largest technology acquisition by private equity.  To show how different the company was back then, its quarterly sales in the second quarter of 2006 were right around $1.6 billion.

Sales were $5.226 billion in 2008, $3.508 billion in 2009, and $4.458 billion in 2010.  The sales in first quarter of 2011 were $1.194 billion versus $1.02 billion in the first quarter of 2010.  With the exception of a gain in years past, Freescale has been running at operating losses.

JON C. OGG