Freescale Semiconductor Holdings aims to raise about $1 billion in an IPO, returning to the market after a record-breaking 2006 private equity buyout as investor interest in the semiconductor industry grows, according to sister news service Reuters.
Meantime, Dunkin’ Brands Group Inc, known for its Dunkin’ Donuts doughnuts and coffee and Baskin Robbins ice cream brands, has filed with U.S. regulators to raise up to $400 million in an initial public offering. The company is owned by
Freescale—which announced its intention to go public in February—aims to sell 43.5 million shares at $22 to $24 implying a valuation of roughly $5.5 billion for the company, according to a document filed with the U.S. Securities and Exchange Commission this month. If the deal prices at the top end, it would raise $1.04 billion.
Once a price range is set for an IPO, the offering typically happens about two weeks later. Freescale, whose rivals include Texas Instruments Inc. and STMicroelectronics NV, was spun off from Motorola Inc in 2004. It went private in 2006 after a $17.6 billion buyout by a private-equity consortium led by
That deal is the biggest tech buyout of its kind on record. But some investors also have described it as one of the most unsuccessful leveraged buyouts ever as it left Freescale with massive debt, hurting its ability to compete in the investment-intensive chip market.
On an enterprise value basis—which includes debt—Freescale will have an implied valuation of about $12 billion to $13 billion. While that is less than the 2006 leveraged buyout deal value, the private equity owners have the opportunity of making their money back by secondary share offerings at future dates.
Freescale, whose chips are used in cars, cellphones and consumer products like Amazon.com Inc’s Kindle electronic reader, plans to use the IPO proceeds to pay off some of the $7.6 billion in debt it still had on its books in the first quarter, when it posted a net loss of $148 million. But while this IPO may seem like a risky bet for many investors, some analysts see a reduction of Freescale’s debt load as an important step in the right direction.
“That’s been one of their biggest issues, their debt load,” said Williams Financial analyst Cody Acree. “It’s definitely an issue that many investors right now are struggling with.”
Freescale’s IPO announcement comes as shares in the broader chip market have been on the rise. The sector, which was battered in the recession, now is being helped by strong demand for smartphones and devices like tablet computers. The Philadelphia Semiconductor Index .SOX is up about 25 percent from a year ago.
Citi, Deutsche Bank Securities, Barclays Capital, Credit Suisse and JP Morgan are underwriting the IPO.
(Sinead Carew is a New York-based correspondent for Reuters news service; additional reporting by Brenton Cordeiro and Abhiram Nandakumar in Bangalore, Noel Randewich in San Francisco and Megan Davies and Clare Baldwin in New York)