Qualcomm Extends Its Offer to NXP for the 29th Time

Advisor July 2, 2018

HQualcomm Extends Its Tender Offer

Media outlets reported that Qualcomm Inc, the giant US chipmaker that deals with the invention of technologies, has extended its tender offer to buy NXP Semiconductors, a leading semiconductor supplier for automotive and digital networking industries, for the 29th time. The deal between the two companies was announced for the first time in 2016, and the value of the deal has since increased from the initial $38 billion to $44 billion in January.

If the deal is finalized, Qualcomm which is currently the supplier of chips to Apple and Android smartphone makers will become the foremost supplier in the rapidly growing automotive chip industry. Recorded to be the biggest deal ever made in the semiconductor industry, the deal has encountered a plethora of obstacles beginning with the protest of NXP shareholders that the initial offer of $110 per share by Qualcomm was an undervaluation of the company.

As such, the shareholders of the company which included Soroban Capital Partners LP and Elliott Advisors (UK) Ltd held out for over a year since the offer was made two years ago. Sources claimed that Qualcomm subsequently increased its bid to $127.50 per share in defense of its position from the $121 billion takeover bid brought by Broadcom Ltd.

Sources also claimed that the deal is highly crucial to Qualcomm’s moves for diversification and extension of its business beyond mobile and its original licensing model. Acquiring NXP has become important in its movement to diversify because of its influence and utility in automotive and other relevant segments.

Media outlets reported that Qualcomm extended its tender offer monthly in 2017, but the company has now resorted to extending the offer every week. It was reported that Qualcomm on Friday extended its offer to buy up all NXP shares from 5 p.m. on June 29 to 5 p.m. on July 6. The company stated that it would continue to extend the tender offer until all the necessary conditions were duly met or waived or termination of the proposal. The shares of Qualcomm reportedly rose with about 1.1% to $56.52 that same day, while the NXP shares experienced a marginal fall. Sources have also reported that Qualcomm’s stock rose up to 0.9% in the second quarter, while the shares of NXP recorded losses of about 5.8% within the same period.

Qualcomm extended its offer to buy up all NXP shares from 5 p.m. on June 29 to 5 p.m. on July

Hurdles To Deal Finalization

The deal had reportedly been cleared by eight out of nine required global regulatory bodies, but it is currently encountering delay due to the China’s Ministry of Commerce (MOFCOM) refusal to clear the deal. Media outlets reported that the Ministry of Commerce had given its approval to two other lesser semiconductor deals involving American companies this year, but a regulator reportedly stated that the deal between Qualcomm and NXP had issues that were too tough to resolve.

The Qualcomm-NXP deal has been cleared by eight out of nine required global regulatory bodies but is currently being delayed by China’s Ministry of Commerce

Trade War Between US and China

Media outlets reported that the Federal Trade Commission has since approved the $44billion deal, but the ongoing trade dispute between the US and China has remained a major hindrance to the closing of the deal. It was reported that Trump imposed trade tariffs on almost $60 billion worth of Chinese products with a considerable portion being on tech products.

Sources also reported that the Trump administration opposed Alibaba’s attempt to take over MoneyGram, despite the CEO’s intimation of Trump before the deal was proposed. The Trump administration also reportedly shot down all efforts by Broadcom to acquire Qualcomm. Sources also reported that the US took strong actions against Chinese equipment makers on the ground of security reasons

Media outlets thus suggested that all the activities stood as reasons why China might choose to strike back with the Qualcomm-NXP deal. According to the Chinese Ministry of Commerce, the deal would have an extensive influence which might negatively affect market competition. Also, the Ministry spokesman indicated that an investigation already revealed that that plans Qualcomm had in place would be incapable of solving the problems of market competition.

Sources claimed that Qualcomm had old issues in China in years past. According to a source, Qualcomm was fined almost $1 billion two years ago on the grounds of its engagement in anti-competitive practices. The company had however gone on to make deals with Chinese phone makers such as Oppo, Xiaomi, Vivo, and Lenovo after the issue.