Which, with NXP at $85, is $36.18, no premium at all. The pop happened last week.
The synergies will mean layoffs, likely to come from the FSL payroll.
who says they can get break even? Blackstone can't force sales price - they can only sell for market price.
If I buy a 10 year old Chevy Cobalt for $30,000 and I put it up for sale, I could price it at $30,000 sure . . . but could I get it?
Wow FSL is in Internet Security. Also, sounds like NXPI isn't going to pay much more than FSL's current marktet value to do the deal. As an NXPI owner I say YES YES YES!!! I may be buying more NXPI tomorrow if it doesn't go crazy at the open.
I have to say, there was a disturbing aspect to the windfall. Blackstone are big boys, and it's tough to muster up sympathy for LBO billionaires. Yet, the process reeked of fraud. The money was green spent well, but I considered it less than honest.
I think the investors are still in it for about $2B -- if some transfer can get them $2B, they break even and probably are ready to turn the company over to the market. If they can get more, all the better. This wasn't the winner they wanted it to be. Most Motorolans are still laughing, as anyone with stock at the time of the LBO made out pretty well (percentage wise, some in absolute value).
You are correct. I was merely referring to their books, like owning something worth 17.6 and 8 years later 6.6 B.
As for how much cash they used, FSL had an increase in debt and other liabilities of about 10 B from mid 2006 to end of 2006 (the LBO). So, yes, Blackstone actually paid 7.6 B. And get 6.6 B now.
The 17.6B and 11B don't add, they subtract. For a sale of the company the buyer will inherit the debt. The debt was used as part of the purchase as is the nature of an LBO.
If I buy a company for $1B, and use $1B in debt issued by the company to do so, if those shares still trade for a decent price, I can bail out at a profit regardless of the price I get. Re-read the history of the 90's LBO frenzy. Good companies were bought, looted, and left for dead with huge debt burdens when reissued in IPOs. Blackstone may still have lost money, but as I said, the breakeven is lower that you suggest. I didn't mean something else.
Maybe you meant something else. The break-even is way higher but Blackstone already wrotedown the value of their assets.
Blackstone came with $17.6 B and owned the company in their portfolio. Of course the company inherited a huge $11B debt to service for the next 14 years. And that debt was reduced through some techniques (like repurchasing under duress or IPO to repay debt). But, fact of the matter is that in 2006, Blackstone had a 17.6 B company in their books, now they have 60% shares of a 11 B company. Let's not even look at the FSL books and compare the equity with what was in 2006. We will start crying. So, Blackstone is surely the net looser: from 17.6 B to 6.6 B. Down 60% in 8 years. There is no break-even in sight for them and they even wrote-down the investment some time in 2008-9. I think (not sure) that they decreased it to 30% so this 40% today is actually an increase of their books compared to 2009.
I agree with motorolaSPS (such a great names, great history). Hey, jda, here is my more than 2 cents. 101% Blackstone is looking for a buyer. In the case of BBRY, the management did deny the story. Now they did not. Even in the case of LBO from 2006, the news broke earlier and it came true. I'm 101% Blackstone is searching for a buyer. The company has reached its good potential for now. Blackstone fears a new downturn, maybe an outright crash. They want to sell the risky asset that is FSL. One of their divisions, the digital networking is in decline (after riding the outstanding wave of the China LTE story).
You ask me about potential buyers? Intel for some of the Dig Networking portfolio. It fits well for their servers into the Cloud RAN. The Microcontroller & Analog and Sensors could be more interesting for Samsung (as it was rumoured), as well Micron (why not). As for Automotive, there could be many buyers on the street.
One thing is almost certain. I doubt one single buyer will want to keep it all. As in the case of Mindspeed, the buyer was interested in 80% of their company and sold the rest to Intel I believe.
Regarding the price target: it is between 38-40 $/share.
Not really. Of course, Blackstone (along with TPG and Carlyle) are going to try to get the most they can out of this transaction. My post here was to try to clarify that the break-even is far lower than you'd calculate. I own no shares, so I'm not inclined to do the detailed analysis, but it would start with an understanding of what Blackstone's current out of pocket investment is, given the nature of the LBO financing and the current bond structure.
Funny, I knew that was the math you did. It doesn't work that way. It's far more complex, consider the billions in bonds that were bought back at pennies on the dollar, as low as .25 if I recall. Those bond investors' losses come right off the top of the $17B when you add the numbers up.
Imagine I buy a $1M home, and the local bank holds my mortgage, $900K. Somehow, I find they are selling off their loans and this one is part of the portfolio, and I manage to buy that paper for $200K. My total skin in the game is now $300K, the bank has taken a $700K loss, not me. (Of course, banks don't trade individual mortgages, but the FSL bonds traded. I could have bought $10K for $2500, and Blackstone did just that. I don't know their current break-even on their FSL investment.
I just know that Michel Meyer is still laughing.