Philips’ semiconductor unit is expected to receive bids from three private equity groups.
Leaks to the Wall Street Journal and the Financial Times suggest that bids for the unit, which is likely to be the largest buyout of its kind this year, may go as high as $10 billion. Philips has chosen a good time to for a sale as the traditionally cyclical chip unit is on an upswing. Its second-quarter figures showed the unit’s earnings before interest and depreciation rose from E27 million ($33.8 million) to E120 million ($150.3 million) on sales up 12% at E1.2 billion ($1.5 billion).
The three groups expected to make bids are: Bain Capital, Francisco Partners, and Apax Partners; Blackstone, Permira and Texas Pacific Group; and a consortium including Kohlberg Kravis Roberts and Silver Lake Partners. The latter group has particular experience in the sector as it bought the semiconductors unit of Agilent Technologies for $2.66 billion in 2005.
Traditionally, private equity groups have been suspicious of each other, but with large prizes up for grabs and cheap money readily available they have shown an increasing willingness to band together. In 2005, a consortium of private equity groups took SunGard Data Systems private for $11.3 billion.