March 28, 2011 11:20 pm

NXP Semiconductor launches secondary offering

NXP Semiconductor, the private-equity owned technology group that went public last year, is launching a secondary offering of some $700m worth of shares, as its private equity investors move to profit from the company’s improved valuation.

The sale of 25m shares is part of a wave of exits by private equity firms from companies taken private during the credit boom in 2005 and 2006. Many of those companies have sold shares in initial public offerings to pay down debt and are now selling more shares to repay their private equity owners.

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During the financial crisis, NXP racked up some $5.5bn in losses. Its IPO last August struggled, pricing below its projected range and raising $476m versus an initially sought $1bn-plus.

However, since its IPO, the shares have doubled in price as growing demand for new mobile electronics products and hopes for a global economic recovery have lifted the sector.

The proceeds of NXP’s share sale will go directly to private equity firms and their investors, not to the company, according to a filing with regulators in early March. That contrasts with the use of the proceeds of its initial public offering last August, which went to paying down debt.

The Netherlands-based technology group, at one time a unit of Philips, sold an 80.1 per cent stake in the company, along with $5bn in debt, to private equity firms including KKR, Bain, Silver Lake and Apax in a 2006 leveraged buy-out.

NXP is trading at $28.69, a rise of nearly 105 per cent since the IPO. The company is now valued at $7.2bn. At the time of the IPO, its value was $3.5bn, or $2bn less than what it was valued at the time of the buy-out in 2006.

Currently, there are some $150bn in public company shares still owned by private-equity firms, according to figures from Barclays Capital.

IPOs of private-equity owned companies this year such as Nielsen Holdings and HCA have seen the proceeds mostly go toward debt repayment rather than liquidity for the buy-out groups who own the companies, in order to ease investor concerns about the companies’ leverage.

Bankers say the second half of 2011 will be busy with secondary offerings raising cash for private equity firms. Already this year, Sensata and Avago, two private-equity-owned firms that went public last year and in 2009, respectively, have made secondary offerings.

The underwriters of the offering, according to the regulatory filing, are Credit Suisse, Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and Barclays Capital.

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