BARCELONA (Reuters) - The merger of NXP and Freescale will bring together two highly diversified chipmakers to create a more focused, leading player in two high-growth markets - automotive electronics and security, NXP’s top executive said on Wednesday.
The cash and stock deal, announced on Monday, valued Freescale at $11.8 billion, excluding debt, and is expected to close in the second half of the year, subject to regulatory approvals. An overlapping business in radio frequency amplifier chips will be sold to ease antitrust concerns.
Chief Executive Rick Clemmer said the merger would position the combined company to play a leading role in markets with some of the greatest growth potential — connected cars, wearable devices, healthcare monitors and mobile payments.
“We have been thinking about what’s beyond smartphones and tablets. We think connected devices are going to be the next driver for the industry,” Clemmer said at the Mobile World Congress, the wireless world’s biggest annual industry event.
That such a shift has already begun is evident this week in Barcelona, where 90,000 executives, marketers and journalists are seeing an array of promising new products for an industry where mobile handsets growth rates are peaking.
Together, NXP and Freescale will become the world’s seventh largest semiconductor maker, based on a global ranking of the industry’s top 20 players published by market research firm IHS Technology, and then combining the two companies’ 2014 revenues.
The merger also creates the largest maker of chips for the automotive sector, controlling about 13 percent of a $26 billion global market for such circuitry. Prior to the deal, NXP already ranked as the largest maker of security chips used in credit cards, government passports and building identification tags.
The strategic rationale for the deal is to fill holes in the two companies’ separate product portfolios by allowing them eventually to offer integrated chips that combine computing, connections and security in a single package, Clemmer said.
While NXP already stands out in the area of security chips, and is passable in terms of its position in connection devices, it is relatively weak in computer processing. “Freescale brings us more connections and stronger computing,” NXP’s CEO said.
That combination gives NXP a headstart on competitors, Clemmer said, by allowing it to build in up-front security in products ranging from connected cars to healthcare devices, where any tinkering by computer hackers could prove lethal.
Reporting by Harro ten Wolde and Eric Auchard, editing by David Evans