STMicroelectronics and Intel Merge Flash Memory Divisions

STMicroelectronics and Intel have announced that they plan to merge their flash-memory businesses along with private equity firm Francisco Partners. The new company will combine key research and development, manufacturing and sales and marketing assets of Intel and STMicroelectronics into a new company.

Overall revenues for the NOR and NADA chips was US$8.3 billion in 2006, but the entire segment was unable to turn a profit, according to market researcher iSuppli.

"From the outset, the company will be a leading supplier of flash memory solutions for wireless communications," said Brian Harrison, named to become the CEO of the new company at the close of the transaction and currently vice president and general manager of Intel's Flash Memory Group. "We will be able to offer customers complete solutions with NOR- and NAND-based technologies, which we believe will provide significant opportunities for growth and the potential to develop products for many new application areas and geographic regions."

Under the terms of the agreement, STMicroelectronics will sell its flash memory assets, including its NAND joint venture interest and other NOR resources, to the new company while Intel will sell its NOR assets and resources. In exchange, Intel will receive a 45.1 percent equity ownership stake and a US$432 million cash payment at close. STMicroelectronics will receive a 48.6 percent equity ownership stake and a US$468 million cash payment at close.

Francisco Partners will invest $150 million in cash for convertible preferred stock representing a 6.3 percent ownership interest, subject to adjustment in certain circumstances. Concurrently, the parties have arranged for the new company to receive firm commitments for a $1.3 billion term loan and $250 million revolver. The term loan will be underwritten by a consortium of banks. Proceeds from the term loan will be used for working capital and payment to Intel and STMicroelectronics for the purchase price."

Posted to the site on 24th May 2007