Intel, ST form independent flash company
By Suzanne Deffree, News Editor -- 5/22/2007
Semiconductor industry giants Intel and STMicroelectronics, along with investment firm Francisco Partners, today announced plans for a new independent flash company that will see key assets from the companies combined for a memory powerhouse expected to compete more effectively Spansion’s and Samsung’s memory operations.
Under the terms of the agreement, ST will sell its flash memory assets, including its NAND joint venture interest and other NOR resources, to the new company while Intel will sell its NOR assets and resources. In exchange, Intel will receive a 45.1 percent equity ownership stake and a $432 million cash payment at close. ST will receive a 48.6 percent equity ownership stake and a $468 million cash payment at close.
Assets and resources from both companies include a patent portfolio of some 2,500 patents and 1,000 patents pending, giving the new company significant scale.
“The formation of the new company is likely to help STMicro and Intel curtail costs in the loss-making NOR business and help compete more effectively with Spansion and Samsung,” Tim Luke, an analysts with the Lehman Brothers, said in a research note this morning. “This may result in a more rational pricing and competitive environment, which we believe is good for the competition, namely Spansion, as well as the new company.”
Meanwhile, Francisco Partners, a Menlo Park, Calif.-based private equity firm, will invest $150 million in cash for convertible preferred stock representing a 6.3 percent ownership interest, subject to adjustment in certain circumstances. Concurrently, the parties have arranged for the new company to receive firm commitments for a $1.3 billion term loan and $250 million revolver. Proceeds from the term loan will be used for working capital and payment to Intel and STMicroelectronics for the purchase price, the three companies said in their statement.
The yet-to-be-named company will be managed by Brian Harrison as CEO-designate, currently Intel’s VP and general manager of Intel’s flash memory group, and Mario Licciardello, currently corporate VP of ST’s flash memories group as COO-designate. The company will be headquartered in Switzerland and incorporated in the Netherlands with nine main research and manufacturing locations around the world and approximately 8,000 employees.
“From the outset, the company will be a leading supplier of flash memory solutions for wireless communications,” Harrison said in the statement. “We will be able to offer customers complete solutions with NOR- and NAND-based technologies, which we believe will provide significant opportunities for growth and the potential to develop products for many new application areas and geographic regions.”
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