The components division of Motorola's semiconductor business haser, as vendor shifts focus to embedded systems. finally been sold in a management buyout (MBO), led by investment company Texas Pacific Group, for $1.6 billion.
The deal, which saw Motorola receive a combination of cash, debt notes and a 10 per cent stake in the company, was finalised despite a late bid from TFG Acquisition, a consortium led by former and current Motorola executives, which offered similar terms.
The semiconductor components group (SCG) has become one of Motorola's least profitable businesses since the semiconductor products sector (SPS) was reorganised into five units in 1997. Continuing problems in the semiconductor industry and Motorola's shift away from components and towards embedded systems forced the company to announce in February that it was looking to sell or find a partner for the SCG.
Christopher Galvin, chief executive of Motorola, said: 'The embedded business and the components business are fundamentally different, with distinct technology, manufacturing, sales and customer requirements. So we created this ownership structure which provides focus for both businesses and ongoing support of our customers, partners and employees.'
The SCG, a high-volume, low-margin business which finds its products in almost every electronic device in the world, contributed $1.5 billion of the $7.3 billion sales of semiconductors by Motorola last year. The business reported a profit of $47 million for the first quarter of 1999, helped by job cuts and restructuring.
The management team and 10,000 employees of the Phoenix, Arizona, group will become part of the recently formed TPG. Steve Hanson will continue as senior vice president and general manager of the firm.
TPG, based in Fort Worth, expects the deal to create the largest semiconductor components manufacturer in the world when the transaction is completed later in the year.
David Stanton, partner at TPG, said: 'SCG is a recognised leader in discrete semiconductors and standard logic and analog products. We are pleased to sponsor this transaction and help SCG to realise the substantial growth opportunities.'
Motorola's share price has climbed steadily since the sale was announced.
Stocks were trading at just under $87, more than $5 higher than before the buyout.
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