Texas Pacific Group Leads Management Buyout of Semiconductor Components Unit of Motorola's Semiconductor Products Sector


SCHAUMBURG, Ill.; 11 May 1999 -- Motorola, Inc. (NYSE: MOT) announced today that Texas Pacific Group has agreed to lead a management buyout of a business unit of Motorola's Semiconductor Products Sector (SPS), the Semiconductor Components Group (SCG). The transaction promises to create the largest semiconductor components manufacturer, while enabling Motorola to focus on extending its leadership position in the embedded solutions market.

"Recognizing that the embedded business and the components business are fundamentally different, with distinct technology, manufacturing, sales and customer requirements, we created this ownership structure in a way that provides optimal focus for both businesses and the ongoing support of our customers, partners and employees," said Christopher B. Galvin, chief executive officer of Motorola. "This transaction is a reflection of SPS' leadership commitment in the embedded market by focusing on its core strength - a market-based approach combined with powerful technology to provide system-level, integrated solutions for its customers. At the same time, the components business has a bright future, with an exceptionally capable management team and unique business model."

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

SCG had sales of about $1.5 billion in 1998, while Motorola's Semiconductor Products Sector had sales of $7.3 billion. With the transaction occurring later in 1999, it is expected to have a slightly negative impact on Motorola's sales. The company believes that its full year earnings will remain within range of current consensus earnings expectations of the investment community. Motorola said it expects to use the proceeds of the transaction for general corporate purposes.

Texas Pacific Group, based in Fort Worth and San Francisco, is a private investment partnership that specializes in acquisitions in a wide variety of industries, including technology buyouts. Steve Hanson, Motorola senior vice president and general manager of the Semiconductor Components Group, 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.

"As an independent enterprise, we will focus on the strengths that have made us one of the world's largest components suppliers," Hanson said. "This will enable us to develop and implement a business model fully suited to our mission, while continuing a strong tie with Motorola."

SCG is one of five business units formed when SPS reorganized in 1997. This group unified SPS' standard logic and analog integrated circuits and discrete components into a single business unit, competing in a market that is less technology-intensive and where leadership is measured by the ability to be the high-volume, low-cost provider with superior customer service. Based in Phoenix, Arizona, the group has approximately 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.

"SCG is a recognized leader in discrete semiconductors and standard logic and analog products," said David M. Stanton, partner of Texas Pacific Group. "We are pleased to sponsor this transaction and help SCG to realize the substantial growth opportunities as the largest semiconductor components manufacturer."

Texas Pacific Group, formed in 1993, is sponsor of TPG Partners II,L.P., of Fort Worth, a private investment partnership with capital of approximately $2.5 billion. TPG's principals include David Bonderman, James G. Coulter, and William S. 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).

Motorola is a global leader in providing integrated communications solutions and embedded electronic solutions. Sales in 1998 were $29.4 billion. As the world's No. 1 producer of embedded processors, Motorola's Semiconductor Products Sector, based in Austin, Texas, offers multiple DigitalDNA(tm) solutions that enable its customers to create new business opportunities in the consumer, networking and computing, transportation, and wireless communications markets. (Additional information is available at www.motorola.com)

A conference call to further discuss this release will be held today (May 11, 1999) at 3:00 p.m. Eastern Time with Bob Growney, President & Chief Operating Officer, and Hector Ruiz, Executive Vice President & President, Semiconductor Products Sector. The dial-in number is (973) 628-9554. A replay will be available for 48 hours by dialing (402) 220-1442. The call will also be archived on our web site at www.motorola.com/investor.

Business Risks: Statements about the expected date of completion for the transaction, the impact of the transaction on Motorola's sales and earnings expectations for 1999 are forward-looking and involve risks and uncertainties. Motorola wishes to caution the reader that the factors below and those contained in Motorola's 1999 Proxy Statement on pages F-15 through F-18 and in its other SEC filings could cause Motorola's results to differ materially from those stated in the forward-looking statements. These factors include unanticipated delays in completing the transaction and unanticipated changes in Motorola's financial performance.

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