A $16 BILLION-PLUS bidding war was set to break out in Silicon Valley last night as two groups of powerful American private equity companies circled Freescale Semiconductor, a chipmaker.
Freescale, a former division of Motorola, the mobile phone company, confirmed last night that it had been in talks that could soon lead to the biggest buyout seen in the technology sector.
Late on Sunday night it was revealed that a consortium of private equity companies led by Texas Pacific, Blackstone, Permira and Carlyle had made a $16 billion (£8.5 billion) offer to take Freescale private. Such a deal would be a record buyout in the technology sector, eclipsing the $11.3 billion paid for SunGard Data Systems last year.
Early yesterday, however, as Freescale’s shares surged on news of the potential deal, another group of private equity firms swooped with a bid of its own, Wall Street sources said.
Shares of Freescale rose by more than 18 per cent by midday to $36.45, in anticipation that any buyout after the expected bidding war would be at a huge premium to the current market value.
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The second group, which is understood to include Kohlberg Kravis Roberts, Silver Lake Partners, Bain Capital and Apax Partners, is said to be poised to table an offer much higher than that made by the Texas Pacific consortium, as it plans to merge the chip maker with the semiconductor unit of Philips Electronics that it bought last month. It is understood that the second consortium believes that it can make far greater cost savings than the first group, simply by pursuing the merger plan.
No member of either consortium would confirm or deny involvement in a bid for Freescale, while the company would say only that it was in the early stages of discussions that could lead to a transaction. “Freescale Semiconductor is in discussions with parties relating to a possible business transaction. There can be no assurances that any transaction will result from these discussions,” it said.