Numonyx launch delayed

The flash memory venture of Intel, STMicroelectronics and Francisco Partners won’t launch until sometime in Q1, but financing is now in place, the companies report.

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 12/26/2007

Chip giants Intel Corp. and STMicroelectronics along with private equity firm Francisco Partners reported today they have extended the deadline for the closing of their joint flash memory venture, Numonyx, to March 28, 2008, originally slated for the second half of this year.

The three companies said they are continuing to work to satisfy the conditions for closing of the transaction, and expect the closing to take place in Q1 2008.

Also, ST said the companies have received executed bank commitments for the financing of Numonyx, following the significant turmoil in the debt capital markets with the revised financing terms involving a senior loan of up to $650 million along with a $100 million committed revolving credit facility for Numonyx.

When the transaction closes, Francisco Partners will invest $150 million in exchange for a 6.3 percent shareholding.

In exchange for the contribution of its flash memory business, ST will receive 48.6 percent of Numonyx shares and $364 million through a combination of cash, to be in the range from low double digits to $130 million, along with long-term subordinated interest-bearing notes. In its financial statements for Q4, ST said it expects to recognize adjustments to its previously estimated non-cash impairment loss, net of tax benefits, related to this transaction.

Based on the finalized financing structure, at closing Numonyx is expected to have a similar level of net cash with lower indebtedness than originally anticipated.

After closing, the companies assert that Numonyx will be the industry's largest supplier of NOR flash memory and a leader in non-volatile memory solutions with a substantial patent portfolio.

In a statement, the companies concluded that they “intend for Numonyx to hit the ground running, with an energized and independent work force, substantial intellectual property, modern and well-equipped manufacturing facilities, and a broad and diverse customer base.”

The launch of Numonyx comes at a challenging time in the memory market with most market researchers projecting poor market conditions during the first half of 2008 due to lingering oversupply issues and falling ASPs.

Indeed, Numonyx rival and memory giant Micron Inc. has continued to feel the brunt of difficult conditions in the memory market and recently announced a $232 million loss.