NXP Semiconductors NV (NASDAQ:NXPI) made a deal to purchase smaller rival Freescale for $11.8 billion. The deal will make NXP the largest supplier of microchips to the automotive industry. The price is just a small premium for Freescale’s shareholders but NXP will be taking on all of the company’s debt adding to the valuation. Freescale is valued at $11.1 billion. With the existing debt added, the total valuation for the deal comes to $16.7 billion. Freescale is formerly a division of Motorola and they produce microchips and microprocessors for automobiles and industrial equipment.
NXP Semiconductors NV (NASDAQ:NXPI) is based in the Netherlands and like Freescale, makes chips for cars. They have recently expanded their portfolio of offerings to include chips that allow smartphones to communicate with other devices in the area and allows for mobile payments which are becoming increasingly popular. As industrial operations have begun designing systems for communication and sensor technology, the companies have enjoyed a revival in the automotive industry they serve. The technology is used to gather data that allows for more automated environments to be created. Both company’s boards have already approved the deal and it just needs to be put to a vote for the shareholders and also pass regulators scrutiny.
NXP Semiconductors NV (NASDAQ:NXPI) feels very confident of the deal and believes it will create synergies that will make a clear path to $500 million in costs savings. They expect to see $200 million of those savings within the first year of the deal. Industry experts are seeing this as one of the more exciting acquisitions so far this year. The combination of the two companies creates a unique blend of product offerings that cover a strong range of revenue generating streams.
The stock is base-building after it long uptrend of the past few months. The technical indicators are strong and volume has been steady but not overwhelming. It has built solid support at $85 and barring any unforeseen events should be steady at this level.