The European Commission has approved under the EU Merger Regulation the proposed acquisition of Freescale (of Bermuda) by NXP (of the Netherlands). Both companies manufacture semiconductors at the global level. The approval is conditional upon NXP divesting its radio frequency power business to address the Commission's concerns that the takeover could otherwise have led to higher prices and less competition in this specific market.
The Commission found that the two companies’ semiconductor product portfolios were mostly complementary, except for radio frequency (“RF”) power transistors. They found that NXP and Freescale are the two largest players and close competitors in the RF power transistors market, in particular those used in base stations for mobile telecommunications. The Commission was concerned that after the merger, as originally notified, the remaining companies on the market would have been unable to exercise sufficient competitive pressure on the merged entity. This could have led to price rises and a reduced choice for customers.
NXP has offered the following to address the concerns:
- To sell its RF power business, comprising all key assets and personnel, except assets necessary for the so-called “front-end” manufacturing of these products, that is imprinting substrate silicon wafers with the precise circuitry required for semiconductors to function;
- A manufacturing agreement with a third party foundry to perform front-end manufacturing services for the divested business
- To provide the RF power business with the transitional manufacturing and services agreements required to guarantee business continuity.
The commitments offered by NXP will allow the purchaser of the divested business to replicate NXP's previous role in the RF power transistors market thereby maintaining effective competition. These commitments completely remove the overlap between the RF power transistor activities of NXP and Freescale, and therefore adequately address the competition concerns identified by the Commission.
The decision is conditional upon full compliance by NXP with the commitments.
