July 24, 2006 – A trio of private equity firms are jostling for position to be the new owner of Royal Philips Electronics’ semiconductor division, with bids for the unit topping $10 billion (8 billion euros), more than 30% above previous valuations, according to media reports.
As a separate entity, the semiconductor unit would be the world’s 11th largest chipmaker, and third in Europe behind Infineon Technologies AG and STMicroelectronics NV. It posted a $389 million profit on sales of $5.84 billion in 2005, with most of the business in Asia and less than a quarter in Europe. Less than 10% of the business’ chips are made for internal use.
Citing “people involved in the bidding,” the Journal identified the three groups of bidders as: Kohlberg Kravis Roberts & Co. (New York, NY) with Silver Lake Partners (Menlo Park, CA); Permira Advisors (London), Texas Pacific Group (Fort Worth, TX), and Blackstone Group (New York, NY); and Bain Capital Inc. (Boston), Apax Partners Worldwide LLC (London), and Francisco Partners Management LLC (Menlo Park, CA).
In June, Philips indicated it would either sell the division, or spin it off by year’s end with an IPO, according to a report in The Wall Street Journal. Initial reports indicated the company had wanted to sell the unit outright, but apparently found no takers, or at least not at an agreed-upon price — analysts had estimated that the unit would be worth about 5-6 billion euros ($7.6 billion). “Philips said it wanted to make its semiconductor unit stronger and that it needed bigger scale to compete. The logical step was to find a partner and this appears to have failed,” said analyst Eric de Graaf at broker Petercam, quoted by Reuters last month.