Intel and ST Microelectronics will combine their flash memory units, which are fitted in mobile phones, MP3 players and cameras.
BRUSSELS - Intel and STMicroelectronics have won permission from the European Commission to spin off and combine their flash memory units, backed by private equity firm Francisco Partners.
"The Commission found that strong competitors are present for each of these products and customers would be able to continue
sourcing their needs from a sufficient number of alternative vendors," the EU executive said in a statement.
The deal will help the combined group build scale and address fierce price competition for flash memory products, fitted in mobile phones, MP3 players and digital cameras.
The transaction will also enable the two chipmakers to offload businesses that weighed on their profit margins.
Under the terms of the transaction, STMicro, Europe's leading chipmaker, will sell its flash memory assets to the newly formed company. Intel, the world's top semiconductor group, will sell its NOR flash memory assets and resources.
In exchange, Intel will get a 45.1 per cent stake and a $432 million ($NZ584 million)cash payment, while STMicro receives a 48.6 per cent holding and $468 million in cash.
Francisco Partners plans to invest $150 million in cash for convertible preferred stock representing a 6.3 per cent stake in the venture, subject to adjustments in certain circumstances.
STMicro, a Franco-Italian group, has moved much of its manufacturing to Asia over the past three years to lower costs.
Intel has already turned over its unit making NAND flash memory to a venture with Micron Technology and industry analysts have long speculated it would spin off its loss-making NOR flash business.
NAND flash, which can retain data after power is shut off, is widely used in digital cameras, photo-snapping phones and portable music players such as Apple's iPod.
NOR is used to store software programs in phones and other electronics.
- REUTERS
