Ericsson and ST Create Mobile Applications Joint Venture
STMicroelectronics and Ericsson have agreed to merge Ericsson Mobile Platforms and ST-NXP Wireless into a joint venture. The 50/50 joint venture will have the industry's strongest product offering in semiconductors and platforms for mobile applications and will be an important supplier to Nokia, Samsung, Sony Ericsson, LG and Sharp. The fabless joint venture will employ almost 8,000 people with pro-forma 2007 sales of $3.6 B. ST is expected to exercise its option to buy NXP's 20 percent of ST-NXP Wireless before the closing of the transaction.
In the joint venture, ST contributes its industry-leading multimedia and connectivity solutions as well as a complete world-class 2G/EDGE platform and strong 3G offering, including customer relationships with Nokia, Samsung and Sony Ericsson. Ericsson contributes its industry-leading 3G and LTE platform technology as well as customer relationships with Sony Ericsson, LG and Sharp. The joint venture, staffed by proven professionals across all functional areas, is designed for long-term stability in its original structure, and is set to become an industry leader in product research, as well as design, development, and the creation of cutting-edge mobile platforms and wireless semiconductors.
"By combining the complementary strengths and product offerings of Ericsson and ST in platforms and semiconductors the joint venture is well positioned to become a world leader," said Carl-Henric Svanberg, president and CEO of Ericsson. "The industry continues to develop at a swift pace and customers see benefits from our broad offering. This partnership is a perfect fit and secures a complete offering, as well as the necessary scale for technology leadership."
"ST is taking another bold step. By combining two industry-leading operations, we will create a world leader in mobile platforms and semiconductor solutions with even stronger capabilities to create customer value and continue to deliver rapid innovation," said Carlo Bozotti, president and CEO of ST. "In April, we announced a plan to join wireless resources with NXP to strengthen our wireless business and enhance our leadership position in a sector which we have targeted for strong organic and external growth and substantial expansion of financial returns. Now, we've expanded our ambitions and will be even better positioned to meet our opportunities."
The joint venture will be headquartered in Geneva, Switzerland and governance will be balanced. Each parent will appoint four directors to the board and Ericsson will designate Carl-Henric Svanberg as the chairman of the board while ST will appoint Carlo Bozotti as the vice chairman. In addition, ST will designate the CEO and Ericsson will appoint the executive vice. An integration management team, led by Alain Dutheil, has already been selected.
The joint venture will acquire relevant assets from the parent companies. After these acquisitions the joint venture will have a cash position of about $0.4 B. Ericsson will contribute $1.1 B net to the joint venture, out of which $0.7 B will be paid by the joint venture to ST. The joint venture is subject to ordinary regulatory approvals.