National to spin off Fairchild semi unit

Electronic News, Dec 16, 1996 by Jim DeTar

Santa Clara, Calif.--National Semiconductor will spin off its newly-created Fairchild Semiconductor unit before the end of the year, according to sources close to the company. If the deal goes through, it would reportedly be driven by Brian Halla, who moved over from LSI Logic to become CEO of National earlier this year.

One source close to Mr. Halla said he is "eager" to conclude the deal before the end of National's fiscal year in May. However, the company is reportedly much closer than that to concluding the sale. Mr. Halla has apparently been trying to package the unit for sale in order to clear the decks for future growth in National's selected target markets, primarily the various chips that go into PCs and communications products.

Fairchild CEO Kirk Pond will remain at the helm of the new company, which will reportedly be formed as a result of a leveraged buyout (LBO) by a group of National employees, including Mr. Pond. "It's no secret that Kirk Pond likes Maine. He has maintained a house back there for some time," one source close to Mr. Halla noted. National will, however, retain a minority interest in the new company, sources said.

Under the proposed deal, all three of the National groups that went to Fairchild when it was formed earlier this year (EN, June 24)--logic, discrete ICs and memory--will remain part of the new company, rather than being split up, as had previously been speculated. Fairchild will remain headquartered at its current South Portland, Maine, facilities.

Because National and Fairchild share manufacturing lines, the two companies will "buy" foundry space from each other while they sort out the final terms of the division.

Although a national spokesman said he could not comment on rumors that Mr. Pond and other investors will shortly buy the company, he noted that "The management of Fairchild has been interested all along. If I was them, I would want to find a way to run it profitably. Right from the beginning, the question was asked: 'What if Kirk Pond could find some investors?' "

He noted that shortly after joining National, Mr. Halla set the wheels in motion for the transaction. "He set the whole thing in motion to do it; beginning with plans to accelerate the construction of the facility in Maine, which is starting at 0.35-micron, 200 millimeter and will go to 0.25-micron." The investment in the 200mm fab in Maine came sooner than Mr. Halla planned when he joined the company and, in order to finance that, he decided to spin out Fairchild and use the capital to fund increased investment in R&D, sources said.

There will be two fab lines at the Maine facility when it is completed: a six-inch and an eight-inch line. After National and Fairchild separate, the spokesman said, "National will own the eight-inch line. All along, it has been assumed the six-inch line would go with Fairchild. Each company could enjoy a foundry relationship with the other. I'm sure we could be friends and come to terms."