Blackstone, TPG, Carlyle, Permira Take 44% Paper Loss with Freescale–UPDATED

Freescale Semiconductor Holdings went public today in an IPO that was underwhelming.

On Thursday, Freescale began trading on the NYSE and the shares stayed above their $18 IPO price. UPDATE: Freescale’s stock added 33 cents, or 1.83%, to close at $18.33 on the NYSE. Volume was 22.7 million.

The chipmaker on Wednesday sold 43.5 million shares at $18 each, below its $22 to $24 price range. Bookrunners on the deal include Citi, Deutsche Bank Securities, Barclays Capital, Credit Suisse and J.P. Morgan. The underwriters have the option to buy another 6.5 million shares.

Last week, LinkedIn went public at $45 a share and surged 109% on its first day. By comparison, the Freescale deal seems lackluster. My coworkers at Thomson Reuters think Freescale’s performance suggests that investor interest in buyout-backed IPOs may be waning. I’m not so sure about that. LinkedIn is a completely different deal and the first social media company to go public.

A more relevant comparison may be HCA, the biggest PE backed IPO ever. HCA, earlier this year, rose a little more than 3% on its first day. Of course, HCA was huge, raising $3.8 billion after selling 126.2 million shares at $30.

John Fitzgibbon, founder of, said people are terrified of the Freescale deal. Last week, Goldman Sachs downgraded the semiconductor sector and institutions are not supporting the Freescale IPO, he said. “They got the deal out the door at a reduced price and it traded up in aftermarket,” he said.

Is Freescale a win for its sponsors? The PE firms are taking a 44% paper loss on the deal.

Blackstone, TPG, Carlyle and Permira acquired Freescale in 2006 for $17.6 billion. The PE firms invested $7 billion equity in the deal, according to sources. With their buy, the sponsors loaded heaps of debt onto Freescale.

The Austin chipmaker had only $832 million in long-term debt in September 2006 (plus an additional $353 million in other liabilities), according to an earnings statement from that time. Freescale currently has $7.6 billion in debt and capital leases as of April 1, according to the SEC filing. On an adjusted basis, total debt comes to $6.5 billion, according to the filing. Freescale plans to use the $742 million it receives in net proceeds to pay down debt.

Blackstone, TPG, Carlyle or Permira are not selling shares in the IPO. They also, apparently, haven’t taken any dividends. The consortium owns about 205.6 million shares, or 99.89%, of Freescale before the IPO. They will dilute their stake to 80.37% after the greenshoe. At $18.99 a share, the sponsors’ stake is worth about $3.9 billion, or a little more than half of what they put in. “They’re basically getting 50 cents per dollar invested,” a source says.

Officials for TPG and Blackstone declined comment.

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