Investors will need good price to buy NXP shares

New York : Private equity owners may be asking too much for the shares of chipmaker NXP Semiconductors NV.

The company has high debt relative to competitors and the cyclical nature of the industry makes it vulnerable to downturns.

NXP's shares would come to market at about 10 or 11 times earnings calculated on an annualised basis, and when certain one-time charges are excluded, Paul Bard, an analyst at Connecticut-based IPO research house said. Competitors trade at an average of 12 to 13 times earnings, Bard added.

"Because of the concerns over leverage and overall trends in the chip industry they are going to need to give investors a pretty good price and I'm not sure if that price that they're coming to market at is going to offer a big enough discount," Bard said.

KKR and other private equity firms have four large US. initial public offerings in he pipeline. NXP's IPO, the first deal up, is expected to price this week.

Renaissance's Bard said that private equity firms need NXP to be successful.

"It gives private equity firms an added incentive to make sure this deal is a success because the last thing they want is for investors to have a bad taste in their mouth when they bring these next few deals public," he said.