Intel, STMicroelectronics to Create Flash Memory Company
STMicroelectronics and Intel said they will create a new independent semiconductor company which will supply flash memory devices for cell phones, MP3 players, digital cameras, computers and other high-tech equipment.
The Swiss and American chipmaking giants said the new company will be comprised of assets which generated about $3.6 billion in combined annual revenue last year.
Under terms of the agreement, STMicroelectronics will sell its flash memory assets, including its NAND joint venture stake, to the new company while Intel will sell its NOR assets and resources. NOR flash is a technology flash devices use to store and run code, usually in small capacities.
In exchange, Intel will receive a 45.1% stake in the new company and $432 million in cash. STMicroelectronics will own 48.6% of the new firm and receive $468 million in cash at closing. Francisco Partners, a Menlo Park, Calif.-based private equity firm, has agreed to invest $150 million in cash for convertible preferred stock representing a 6.3% stake.
In addition, the new company has commitments for a $1.3 billion term loan underwritten by a consortium of banks, and $250 million revolving credit facility. Proceeds from the term loan will be used for working capital and payments to Intel and STMicroelectronics.
The deal is expected to occur in the second half of 2007, subject to regulatory approvals and other conditions.
"The new company will be positioned to service customers with all of the elements necessary to deliver current and next-generation non-volatile memory technologies, while allowing ST to redefine its participation in flash memory," said Carlo Bozotti, STMicroelectronics president and CEO.
Brian Harrison, current vice president and general manager of Intel's flash memory group, will become CEO of the new company, which will be headquartered in Switzerland. Mario Licciardello, current corporate vice president of ST's flash memories group, will become chief operating officer. The company will have nine main research and manufacturing locations around the world and about 8,000 employees.
