Former Motorola chip business could relieve debt burden with IPO.
Freescale was sold to private equity investors by Motorola in 2006 for $17.6bn and has been carrying a heavy debt load ever since, close to $10bn. The recession blocked their earlier attempts to sell stock in the company.
The remaining Motorola businesses found themselves in a similar bind until January. However, at the beginning of the year, they were split into Motorola Mobility, which primarily handles the company’s consumer electronics business, and Motorola Solutions, which is focused on communications products and services for the enterprise market.
According to Bloomberg, Freescale has appointed Deutsche Bank and Citigroup to begin laying the groundwork for an IPO. Ownership of the company is currently led by the Blackstone investment group and also includes the powerful but secretive Carlyle Group.
During the recession, Freescale was hit hard by the slumps in two of its key markets, automotive and cellular communications. However, the US auto industry has begun to recover following the federal bail-out programme and Freescale has also positioned itself strongly in supplying chips for the fast growing tablet and netbook computing markets with ARM-based processors, even working on its own concept designs.
Nevertheless, the investors still need Freescale to be a major beneficiary of renewed growth in the chip business. Earlier this year, Blackstone revealed that it values its stake at just 45c on the dollar against the original purchase price. Other investors were even more cautious, with Carlyle and the Permira fund applying a value of 35c and a fourth member of the purchasing consortium, TPG, was still more pessimistic assessing the valuation at 25c.
Freescale CEO Rich Beyer is on record as saying than an IPO would primarily benefit the company in the short term by reducing its debt levels.