Freescale Files to Raise $1.15 Billion in Stock Sale
Freescale Semiconductor Inc., the chipmaker partly owned by Blackstone Group LP, plans to raise $1.15 billion in what would be the biggest initial share sale by a U.S. technology company since Google Inc. went public in 2004.
The company will use proceeds to pay down the balance of a $764 million loan maturing next year and other debt, it said in a regulatory filing today. Freescale has total debt of $7.62 billion, according to the filing.
Chief Executive Officer Rich Beyer aims to reduce the liabilities that have resulted in losses for the Austin, Texas- based company. He’s trying to take advantage of a rally in chip stocks that began last year. The Philadelphia Semiconductor Index, which tracks the performance of 30 of the industry’s largest companies, has climbed 51 percent since August.
“Things have improved in the semiconductor industry and Freescale’s been a beneficiary of that,” said Dave Novosel, an analyst in Chicago with Gimme Credit LLC.
Freescale is the largest supplier of chips to the U.S. automobile industry and makes semiconductors used in phone networks and consumer devices. The company hired Deutsche Bank AG and Citigroup Inc. to handle the share offering.
Freescale piled on debt as it was taken private by Blackstone, TPG, Carlyle Group and Permira Advisers LLP in a $17.6 billion transaction in 2006. The chipmaker’s net loss narrowed to $102 million in the fourth quarter as sales rose 24 percent to $1.18 billion, the company said Jan. 27.
“Clearly the huge upswing in revenue has had a very positive effect on margins,” Novosel said.
String of Success
The move to go public follows a string of successful IPOs of companies backed by private-equity firms, such as Nielsen Holdings NV and BankUnited Inc. Kinder Morgan Inc., the energy- pipeline company whose owners include Carlyle, completed the biggest LBO-backed initial share sale yesterday, raising $2.9 billion. The stock rose as much as 7.1 percent today.
Freescale’s filing didn’t indicate whether any of its owners would sell shares. Beyer has previously said that the sale would consist of new shares to raise money and pay down debt.
Buyout managers typically wait to pare their holdings until secondary offerings, as was the case with fellow chipmaker Avago Technologies Ltd., owned by KKR & Co. and Silver Lake. Avago, based in Singapore, has more than doubled its stock price since its 2009 IPO.