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Siemens' $8B chip float
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March 17, 1999: 10:31 a.m. ET
Electrical giant's stock jumps on plans to list chip unit in Europe, New York
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LONDON (CNNfn) - Europe's largest electronics business, Siemens, will float its semiconductor division in Europe and the U.S. by early next year in a move that should value the unit at around $8 billion.
The Munich-based company is set to hive off the unit, which it will call Infineon Technologies, in April to prepare the way for the initial public offering.
"This move is a major milestone en route to a public listing at a time when the generally expected upswing in demand for semiconductors takes place," Infineon's president and chief executive officer, Ulrich Schumacher, said in a statement.
The plans are part of a major restructuring announced by the company last November.
Investors reacted warmly to the planned flotation, pushing Siemens (FSIE) shares 3.2 percent higher in Frankfurt to 62.90 euros.
A Siemens spokeswoman confirmed the company would "maintain a minority stake" in the listed company. A dual quote in Europe and the U.S., however, did not necessarily imply that Infineon would be listed in Frankfurt, she added.
"We are based in Munich so there would be advantages to a listing in Germany but no decision has been taken yet," she told CNNfn.
Anita Farrell, an analyst at Merrill Lynch in London, estimated that the listing would value Infineon at about $8 billion, although she stressed much would depend on market conditions at the time.
Infineon reported revenues of 6.7 billion marks ($3.7 billion) in the year to end September 1998, but a downturn in the worldwide semiconductors market led to a 1.2 billion mark pretax loss in that division, compared with a profit of 109 million marks the previous year.
Much of Siemens' semiconductor business is reliant on sales of DRAM chips, which is a highly volatile market. This had led some analysts to doubt that a flotation would succeed when the company announced its plans to divest the business last November.
Now, however, the environment has improved. "The market has changed a lot over the last six months and is definitely on an upturn," said Farrell.
Siemens' semiconductor business has grown rapidly in recent years, moving from 19th in 1993 in global rankings to 10th last year.
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Siemens
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