Synergies on the Horizon for NXP Semiconductors (NXPI) When FSL Merger is Approved, Likely in 4Q15 - Mizuho

NXP Semiconductors NV (NASDAQ: NXPI) is likely to gain U.S and China approvals in 4Q15, the divestiture is just "par for the course", analysts at Mizuho said.

The CFIUS mandate is to enhance trade and commerce, with reviews focused on the impact of foreign investments or divestitures on national security. So while it could block an investment or divestiture, and recommend against a divestiture, it typically does not block mergers. Mizuho analyst, Vijay Rakesh, expects NXPI to be able to get much of its regulatory approvals from U.S and China and complete the merger process in 4Q15.

The RF power business that is intended to be spun off, currently supplies Huawei, ZTE and Nokia Siemens Networks and the CFIUS review of the RF divestiture is expected to be completed by November 23. However, Rakesh believes this process is the smaller of the two steps.

If this merger does go through, it could open the door to significant synergies. NXPI is 50% outsourced to foundry versus FSL only 25% outsourced, FSL has $5B of debt at 5% that can be refinanced at 3.5-3.75%, and FSL and NXPI have 35-40% overlap in key automotive and industrial markets, opening up significant sales headcount synergies and cross-selling opportunities.

Maintained Buy rating and price target of $120.

For an analyst ratings summary and ratings history on NXP Semiconductors NV click here. For more ratings news on NXP Semiconductors NV click here.

Shares of NXP Semiconductors NV closed at $81.12 yesterday.

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