Image source: NXP.

Two months ago, rumor had it that NXP Semiconductors (NASDAQ:NXPI) was planning to sell its standard products division for about $2 billion. Today, the rumor has become solid news -- but the price tag turns out to be higher.

The rumored buyer, Chinese investment firm JAC Capital, turned out to be one half of an all-Chinese consortium making the bid. JAC is expanding a long-running interest in NXP, which included buying its RF signal amplifier operations in 2015. The other firm in the upcoming deal is a less familiar name. I was unable to gather any information about Wise Road Capital, short of reading news posts in the original Mandarin. According to NXP's press materials, it's an equity fund focused on building smart and green cities around the world.

Together, these firms scrounged up $2.75 billion to pry the standard products segment away from NXP. The unit will be rebranded as Nexperia, a moniker it pulled from a line of NXP's media processors. The unit will keep essentially all of its 11,000 employees worldwide. Headquarters will remain in Nijmegen, Netherlands, and Nexperia also gets the manufacturing and research assets that NXP holds under the standard products division today.

The separation is about as clean as possible, though the Nexperia unit also will hold on to a handful of key products in NXP's current laser focus on the automotive computing market. You win some, you lose some -- and these are simple, industry-standard components that NXP can easily source right back from Nexperia or from plenty of other companies.

Standard product sales declined 3% in 2015, representing about 20% of NXP's total revenue. In the recently reported first quarter, segment sales fell 15% year over year and only accounted for 12% of NXP's overall sales. The division's operating margins also tend to run lower than the high-performance mixed signal segment's, where the rest of NXP's operations are reported.

To sum up, NXP is spinning off a low-margin business that largely does not fit with the company's newfound focus on automotive and security products. The recently closed acquisition of Freescale Semiconductor should not hider the Nexperia agreement in any way, since Freescale's products fell cleanly into the high-performance sector.

The deal is expected to close in the first quarter of 2017, subject to the usual battery of regulatory approval and shareholder votes. NXP is likely to sink the funds into retiring more of the Freescale merger's debt.

NXP shares fell as much as 1.8% on the news, but quickly recovered to a 0.5% decline that was right in line with the S&P 500.

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