News | October 11, 2006

Report: LBO Threatens Freescale's RF Business

Boston -- Strategy Analytics, the global research and consulting company, released, "LBO Debt Load Threatens Freescale's RF Business," noting that the Freescale LBO (leveraged buyout) will force the company to assume much larger debt than NXP (formerly Philips Semiconductor) or Avago Technologies (formerly part of Agilent), two recent semiconductor LBOs.

The proposed leveraged buyout (LBO) of Freescale, by a consortium lead by The Blackstone Group, puts the future of the company's RF products in doubt. Earnings inadequate to cover interest payments could easily lead to wholesale dismantling of Freescale, which would put Freescale's RF and wireless products at particular risk, given that these products benefit from Freescale's complete platform solutions.

"At the proposed price of $40 per share, the Freescale LBO could generate more than $11 billion in debt for the company," said Chris Taylor, Director of the RF & Wireless Component service. "Servicing this debt will prove a challenge unless the company can maintain the growth and profitability that it experienced in Q2 '06 without letup."

Asif Anwar, Director of the GaAs and Compound Semiconductor service, added, "After this LBO, we are particularly concerned about Freescale's ability to fund the development of new RF products, such as power amplifiers for W-CDMA handsets and platforms for UWB and ZigBee."

SOURCE: Strategy Analytics, Inc.