Private Equities Cut Ties to NXP
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  • PARIS — Private equity funds, which bought 80.1 percent of NXP Semiconductors in the fall of 2006, are selling off their remaining NXP shares, terminating their control over the Dutch semiconductor company.

    The move marks the end of an era when the private fund consortium, comprising Kohlberg Kravis Roberts (KKR) and Bain Capital Partners, took over the then troubled NXP, cut the company to its bare bones, and restored profitability.

    NXP announced on Wednesday, May 14, the pricing of a previously announced secondary offering of 17,376,611 shares of its common stock at a price to the public of $60.35 per share. Those shares are "to be sold by certain of its principal stockholders, including affiliates of funds managed or advised by Kohlberg Kravis Roberts & Co. L.P. and Bain Capital Partners, LLC," according to NXP.

    The offering is expected to settle and close on May 19, 2014, subject to customary closing conditions. NXP will not receive any proceeds from the sale of shares in the offering.

    Commenting on the announcement Wednesday, NXP CEO Rick Clemmer said in a statement:

    Today's news marks the end of the ownership of NXP Semiconductors by the Private Equity Consortium. After giving effect to today's announced offering, the Private Equity Consortium that purchased NXP on September 29, 2006 will have sold all their remaining NXP shares. We would like to thank all members of the Private Equity Consortium for their support in NXP throughout the years.

    History will judge the long-term impact of a roughly eight-year reign over NXP by the private equity consortium.

    Certainly, NXP, a storied semiconductor company with deep roots in Royal Philips, is no longer a sprawling entity juggling numerous R&D projects and ruling various semiconductor market segments.

    Many industry observers were dubious when the private equity funds took the helm at NXP.

    Malcolm Penn, CEO of Future Horizons, was quoted as saying that KKR "raided NXP" to strip out "the NXP heart and crown jewels into a variety of smaller entities." His point was that, while private equity harvested spun-off divisions for bigger profit, the downsized company was left with no prospects for good growth in the future.

    Not everyone agreed.

    18 months ago, asked about KKR's control over NXP, CEO Clemmer, once a senior advisor to KKR and handpicked by the firm to turn around NXP, said, "They've given us focus and regeneration... The jury is still out on Freescale, but there are a plenty of examples where private equity firms were beneficial to chip companies... like Fairchild or Intersil."

    While Freescale today is still working to narrow its focus -- in its product lines and market segments -- NXP has taken far more drastic measures. NXP today is focused on five product segments including identification, automotive, portable/computing, infrastructure/industrial, and standard products.

    Clemmer has always held the view that NXP must find specific areas where the company can absolutely dominate and lead, rather than putting itself in a position to spend all its energy and resources to chase No 1. NXP has so far done that and done it well.

    In the first quarter of 2014, NXP delivered total revenues of $1,246 million, a 15 percent increase year-on-year and a 4 percent sequential decline.

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