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Motorola Files for IPO of Chip Unit
Dec 18, 2003
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Schaumburg, IL, U.S-based cellular phone maker Motorola Inc. filed a prospectus to take its U.S. $4.8 billion semiconductor unit public.

An IPO of the 23,000-employee unit, dubbed Semiconductor Product Sector, or SPS Spinco Inc., could raise as much as $2 billion for the company.

The company didn't specify the stock exchange or ticker symbol planned for the IPO. In addition, the only underwriter named so far is Goldman, Sachs & Co., according to the U.S. Securities and Exchange Commission filing. The investment bank has provided advisory services to Motorola in the past, including its $260 million acquisition of optical system maker Synchronous Inc. in 2001.

Patricia Vlahakis of Wachtell, Lipton, Rosen & Katz has been retained as issuer's counsel, and Sullivan & Cromwell LLP's Andrew D. Soussloff is acting as underwriter's counsel.

SPS is expected to issue shares of Class A common stock, with Motorola taking control of the new company's Class B common shares. Motorola said it plans to distribute its ownership interest in the new company, which will be based in Austin, Texas, via a tax-free spinoff by the end of 2004. The distribution would take the form of a special dividend to Motorola's common shareholders.

Analysts said that Motorola is sending off SPS in much better shape than it did an earlier spinoff, ON Semiconductor. Casey Ryan, an analyst with Wells Fargo Securities LLC in San Francisco, said that he was somewhat surprised that Motorola is not placing much of its $7.5 billion in debt on the books of SPS, even though much of it was incurred to build fabrication plants for the chip unit.

SPS said that Motorola has agreed to purchase "substantially all" of cellular baseband chips from SPS through 2006. Motorola accounted for 55 percent of SPS sales in 2002. SPS Spinco said it has not settled on a new name yet. (The Deal.com)

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