Motorola Lands $1.6 Billion for Semiconductor Business Unit

After much talk and speculation, Motorola Inc. (Schaumburg, IL) has sold off its Semiconductor Components Group (SCG), a business unit of its Phoenix-based Semiconductor Products Sector (SPS). Under the agreement, Texas Pacific Group (Fort Worth, TX) has agreed to lead a management buyout of SCG.

SCG is one of five business units formed when SPS re-organized in 1997. This group unified SPS' standard logic, analog ICs, and discrete components into a single business unit. The group has about 10,000 employees worldwide. It has additional manufacturing operations in China, the Czech Republic, Japan, Malaysia, Mexico, the Philippines, and Slovakia, and sales offices throughout the world.

Under the proposed transaction, Motorola will receive $1.6 billion in cash, notes, and approximately 10% of the stock of the new company. The transaction is expected to close in the second half of 1999, subject to regulatory and other approvals. Debt financing for the purchasers is being arranged by the Chase Manhattan Corp.

Once the transaction is complete, Steve Hanson, senior vice president and general manager of SCG, will continue to lead the business as president. The present SCG management team and employees of Motorola SCG will also become employees of the new company.

Texas Pacific Group is a private investment partnership that specializes in acquisitions in a wide variety of industries, including technology buyouts. Formed in 1993, Texas Pacific Group is sponsor of TPG Partners II (Fort Worth, TX), a private investment partnership with capital of approximately $2.5 billion. TPG's principals include David Bonderman, James Coulter, and William Price.

The partnership and its principals have completed significant investments in technology and telecommunications (Paradyne, Zilog, GlobeSpan Semiconductor, GT Com, Landis & Gyr Communications), food and beverage products (Beringer Wine Estates, Del Monte Foods), retail (J. Crew), healthcare services (Oxford Health Plans), and airlines (Continental, America West).