KKR in the wings as Infineon chief executive quits
11:22 a.m. 05/27/2008 By Steve Goldstein Provided by
LONDON (MarketWatch) - With Wolfgang Ziebart out of the way, analysts say a deal may be reached between German chipmaker Infineon Technologies and NXP Semiconductors, the microchip company mostly in the hands of Kohlberg Kravis Roberts.
Infineon Technologies (IFX) on Monday announced Ziebart was leaving after four years as chief executive due to "strategic differences" with Infineon's chairman, Max Dietrich Kley.
Ziebart will be succeeded by Peter Bauer, a management-board member, and the company announced a new restructuring program.
Deals weren't mentioned by the Neubiberg, Germany, firm in its news release mentioning Ziebart's departure. The new "IFX 10-Plus" program calls for optimized portfolio management, sharply reduced manufacturing costs, and increased efficiency.
NXP, the Eindhoven, Netherlands, microchip maker that used to be an arm of - and is still 20% held by -- Philips Electronics (PHG), hasn't been reticent to make deals. In April it said it would sell most of its unit that produces chips for wireless applications to STMicroelectronics (STM) for $1.55 billion.
Now analysts expect the rest of NXP's business, which makes microchips for automotive and industrial applications, could be joined with Infineon, which also makes chips for automotive and industrial uses after spinning off its memory-chip division, Qimonda (QI) .
"NXP has a similar operating-profit margin potential as Infineon, no commodity-memory-chip exposure and follows also an outsourcing strategy for manufacturing," said Guenther Hollfelder, an analyst at UniCredit.
"Infineon and NXP would be clear global-market leaders in the high-margin automotive and industrial markets, which would represent the majority of its sales."
The German newspaper Die Welt suggested KKR could take a stake in Infineon - say, 40% to 50% -- in return for NXP assets.
"This solution would enable Infineon to strengthen its positions in areas like automobile or industry, and allow KKR to monetize its stake that could then be sold in the market further down the line and pull out of an industry which has failed to deliver on all its promises for a private-equity firm," said Stephane Houri, an analyst at Natixis Securities.
Such a deal wouldn't be easy - it would leave Infineon with its own unit making chips for cellphone makers such as Nokia (NOK) . Houri speculated that STMicro may then try to buy that division to bring it closer to Texas Instruments (TXN) and Qualcomm (QCOM) .
Plus, Infineon still owns 77.5% of Qimonda, the unprofitable memory-chip division. Infineon has set a goal of reducing its Qimonda stake below 50% by February. And NXP carries $6.4 billion of debt.
Price, too, is a concern. UniCredit's Hollfelder worries that Infineon may pay too much.
Analysts also have mentioned Freescale Semiconductor, which is now held by Blackstone Group (BX), as a possible merger partner for Infineon.
A message left with Infineon wasn't returned. An NXP spokesman declined to comment.
U.S.-listed Infineon shares dropped 4.7%, though they're still up over 16% over the last three months.
"In our opinion, the reasons behind this share-price performance were better-than-expected fourth-quarter results, favorable dollar rally, speculations around quick disposal of Qimonda and potential takeover of Infineon," said Adrien Bommelaer, an analyst at Credit Suisse.
"While conceding that at present trading rates, its logic business implies a cheap EV/Sales multiple of 0.9 times, we would reiterate our neutral stance as dollar rally seems to have stopped, if not reversed, making it tougher for IFX to reach its 2009 profitability targets," he said.
"Also, uncertainty over its stake in Qimonda also keeps us cautious on Infineon," he said. |
