NXP Semiconductors agreed to acquire Freescale Semiconductor in a stock-and-cash merger announced on March 2, 2015. The headline value—just over $40 billion—was the projected enterprise value of the combined company, not the cash price paid for Freescale. The merger closed on December 7, 2015, with the combined business continuing as NXP Semiconductors.
What did the $40 billion figure mean?
NXP’s announcement described the combined company’s enterprise value as just over $40 billion and projected combined revenue above $10 billion. Enterprise value is not the same as the equity value of Freescale or the amount of cash paid to its shareholders.
| Measure | Announced figure and meaning |
|---|---|
| Combined enterprise value | Just over $40 billion, as stated by NXP on March 2, 2015; this was the value attributed to the combined business. |
| Freescale equity value | Approximately $11.8 billion, implied by the merger terms using NXP’s February 27, 2015 closing share price. |
| Freescale enterprise value | Approximately $16.7 billion, calculated using NXP’s February 27, 2015 closing share price. |
| Projected combined revenue | Above $10 billion, according to NXP’s announcement; this was a projection, not a reported post-merger result. |
How was the merger structured?
For each Freescale common share, shareholders were to receive $6.25 in cash plus 0.3521 of an NXP ordinary share. NXP planned to fund the cash portion with $1 billion from its balance-sheet cash and $1 billion of new debt, and to issue about 115 million new NXP shares. Freescale shareholders were expected to own roughly 32% of the combined company.
These terms combined immediate cash with an ongoing stake in NXP. The approximately $11.8 billion equity value and $16.7 billion enterprise value attributed to Freescale were calculations based on NXP’s February 27, 2015 closing share price, rather than fixed cash purchase prices.
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Why did NXP buy Freescale?
NXP presented the deal as a way to strengthen its position in automotive semiconductors and become a leader in general-purpose microcontrollers (MCUs). The companies’ combined capabilities were also framed around growing demand for connectivity, processing and security. NXP CEO Rick Clemmer described the merger as an effort to build an “industry powerhouse” focused on high-growth opportunities and high-performance mixed-signal solutions.
The cost-saving case was a management forecast, not a confirmed outcome: NXP projected $200 million in first-year cost savings and described a path to $500 million in annual synergies. Those figures were expectations made when the deal was announced.
What approvals were required, and when did it close?
The merger needed shareholder approval and regulatory clearances. NXP reported U.S. Federal Trade Commission approval on November 25, 2015, after clearances in Europe, South Korea and Japan. On November 27, NXP announced that China’s Ministry of Commerce (MOFCOM) had given final approval. NXP also said the sale of its RF Power business to Jianguang Asset Management (JAC Capital) was a condition of completing the transaction.
| Date | Milestone |
|---|---|
| March 2, 2015 | NXP and Freescale announced a definitive merger agreement. |
| November 25, 2015 | NXP reported U.S. FTC approval, following European, South Korean and Japanese clearances. |
| November 27, 2015 | NXP announced final approval from China’s MOFCOM. |
| December 7, 2015 | The merger closed; the combined company continued as NXP Semiconductors. |
What was disclosed after the merger?
In its full-year 2015 results, NXP said the merger contributed approximately one month of Freescale revenue. The same report disclosed a $239 million restructuring charge and $49 million in stock-based compensation charges related to employees terminated as a result of the merger. These are reported post-close accounting charges, distinct from the cost-savings projections NXP made at announcement.
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