STMicro & NXP Merge Wireless Businesses

The new company will have the scale to better meet customer needs in 2G, 2.5G, 3G, multimedia, connectivity and all future wireless technologies. The combined venture will be created from successful businesses that together generated $3B in revenue in 2007 and will own thousands of important communication and multimedia patents. The new company will be a solid top-three industry player and among the few companies with the scale and expertise to pursue the R&D investments necessary to establish itself as a leading player in the wireless and mobile-multimedia market. The new organization will combine key design, sales and marketing, and back-end manufacturing assets from both companies into a streamlined worldwide joint venture that will rely on its parent companies and foundries for wafer fabrication services. This new leading player will be well positioned with all of the vital technologies for UMTS (Universal Mobile Telecommunication System); for the emerging 3G Chinese standard; as well as other cellular, multimedia and connectivity capabilities, including WiFi, Bluetooth, GPS, FM Radio, USB, and UWB (Ultra-wideband), to effectively serve its global customers with complete wireless and mobile solutions across the spectrum of applications. The JV will also integrate the Silicon Laboratories’ wireless and GloNav’s GPS operations recently acquired by NXP. Both parent companies contribute strong businesses generating comparable revenue - each with 2007 operating profit of approximately $100 million. In order to create a clear ownership structure, STMicroelectronics will take an 80% stake in the joint venture. NXP will receive $1.55 billion from ST, including a control premium, to be funded from outstanding cash (cash and cash equivalents balance for ST at year end 2007 were $3.5 billion). The new organization is designed to be in a very healthy financial position, without debt, and able to grow its business with all of the leading cellular handset manufacturers. The parents have also agreed on a future exit mechanism for NXP’s ongoing 20% stake, which involves put and call options, exercisable beginning 3 years from the formation of the JV, at a strike price based on actual future financial results, with a 15% spread. The new company will be incorporated in the Netherlands and headquartered in Switzerland with approximately 9,000 employees worldwide. These people, almost equally contributed by ST and NXP, will be in position to serve the JV’s large and demanding global customer base. Not owning any wafer fabs, the joint venture is designed with low capital intensity, while having access to secure leading-edge manufacturing capacity from both parent companies and foundries; and will operate its own very competitive assembly and test facilities in Calamba, Philippines and Muar, Malaysia. NXP’s Calamba site as a whole will be transferred to the JV. In addition, part of ST’s back-end operations in Muar will be separated from the parent company’s existing facility in the area and transferred to the JV. The new company will also benefit from a dedicated worldwide sales and customer support team. The Joint Venture will be governed by a board of Directors on which both Carlo Bozotti and Frans van Houten will participate, looking after the best interest of its customers and the success of the JV. Aiming for a closing in Q3 of this year, the deal is subject to regulatory approvals and labor council consultations. The parent companies expect over $250 million in annual cost synergies from the JV by 2011. In financial impact, ST expects the transaction to be accretive to its non-GAAP cash EPS in 2009.