The chipmaker has hired Deutsche Bank and Citigroup to handle its IPO, Bloomberg News is reporting. Credit Suisse and Barclays will also work on the deal.
Austin, Texas-based Freescale expects to use funds raised by the IPO to pay off $1.2 billion in debt it has coming due in 2014, Bloomberg says.
This IPO would be the second time Freescale makes a trip to public markets. Motorola spun off Freescale in 2004. In 2006, Blackstone led a consortium of PE firms to take Freescale private in a $17.6 billion deal. Other buyout shops involved in the deal include the Carlyle Group, Permira and TPG. At the time, the $17.6 billion transaction was the largest tech buyout in history.
Last week, Freescale reported that fourth quarter sales jumped nearly 15% to $1.1 billion for the period ended Dec. 31 from $951 million for the same time period in 2009. Net losses narrowed to $102 million for the quarter from $114 million loss in 2009. Adjusted EBITDA for 12 months ended Dec. 31 was $1.1 billion. Long-term debt stood at roughly $7.6 billion as of Dec. 31. (Freescale also has $602 million in other liabilities)
Not surprisingly, much of Freescale’s debt came from the Blackstone-led buyout. The 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. It now has $7.6 billion in long-term debt.
Now I’m used to PE firms piling debt onto companies that they acquire. They typically pass this debt onto the next buyer, whether through a sale or an IPO. In Freescale’s case, this will be the retail investor, which is egregious. But the IPO is expected to do well.
Just look at NXP, a Dutch chipmaker bought by KKR, Bain, Silver Lake, Apax and AlpInvest in 2006 for $11.1 billion. The PE firms loaded NXP up with about $6 billion in debt. NXP went public last year and is currently trading well above its $14 IPO price. On Tuesday, shares of NXP were up 27 cents to $27.50 in mid-day trading.
“The IPO market is pretty strong based on high valuations today versus anytime since 2008,” says a banker.