Freescale to acquire SigmaTel for $110M

Freescale has been looking to expand its consumer-electronics market presence in an effort to balance challenges it faced in 2007's wireless market, when its largest customer, Motorola, lost significant ground in handset sales.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 2/4/2008

Freescale Semiconductor plans to acquire SigmaTel Inc for $110 million in cash as it moves to add to its multimedia-focused analog and mixed-signal IC portfolio.

The two companies have much in common. Indeed, both Texas-based companies have shown interest in the portable media players (PMP)/MP3 player market. As that market expanded in 2007, it became crowded with semiconductor competitors and SigmaTel, in particular, felt the heat, according to researchers at iSuppli.

“The increased demand for feature rich, always-connected consumer electronics devices is driving manufacturers to look for platform-based solutions that will accelerate time to market,” said Phil Pompa, president and CEO of SigmaTel, in a statement. “With the addition of SigmaTel, Freescale is the obvious choice for these next-generation devices."

Meanwhile, Freescale has been looking to expand its consumer-electronics market presence in an effort to balance challenges it faced in 2007’s wireless market, when its largest customer, Motorola, lost significant ground in handset sales. Motorola last week announced it is exploring the separation of its struggling mobile devices business because of the strain it continues to place on its financial results.

“The SigmaTel acquisition enhances the long-term, strategic value we can deliver to our customers,” added Lynelle McKay, senior VP and general manager of Freescale's networking and multimedia group, in the statement. “Freescale’s proven strengths in the high-performance multimedia and general purpose markets are complemented by SigmaTel’s strong analog and mixed-signal expertise in the portable media player and consumer audio markets.”

Under the terms of the agreement, Freescale will pay $3 per outstanding share of SigmaTel stock, a 68% premium on SigmaTel’s Friday close of $1.79. The agreement is expected to close in Q2.