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STMicro and NXP tie-up in wireless joint venture

Together we stand (divided we fall)

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STMicroelectronics NV plans to merge its wireless semiconductor business with rival NXP to create the world’s third largest wireless chip company.

The joint venture will have about $3bn in combined revenues and some 9,000 staff under one organisation.

STMicro will take the lion’s share in the joint venture with an 80 per cent stake. The firm said in a statement that it will pay NXP $1.55bn including a control premium.

It has also built in a put and call option for NXP to withdraw its 20 per cent stake in three years’ time. STMicro will fund the deal from its own cash reserves.

STMicro president and chief exec Carlo Bozotti said: “The new company will be a solid top-three industry player and among the few companies with the scale and expertise to pursue the R&D investments necessary to establish itself as a leading player in the wireless and mobile-multimedia market.”

The two firms, which combined boost research and development budgets of about $400m a year, supply the likes of mobile giants Nokia, Samsung and Sony Ericsson with wireless chips.

Bringing both together under one roof will be seen by many as a move to consolidate costs in the face of concerns about a slowdown in customer spending and a looming recession.

NXP president and CEO Frans van Houten said: “It is increasingly apparent that the most successful companies in this space are the largest ones.”

STMicro and NXP, which was spun out of electronics giant Philips 18 months ago, hope to reel in more than $250m in annual cost synergies from the joint venture by 2011.

The deal is expected to close in the third quarter of this year subject to the usual regulatory requirements.

Earlier this month STMicro completed the merger of its cash-starved flash memory units with chip giant Intel creating a new company called Numonyx.

The two firms had been forced to delay closing the deal, originally due to complete at the end of December, because of "significant turmoil" in the financial markets. ®

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