Network Builder Reports

Qualcomm inches closer to NXP purchase

by Martha DeGrasse

 

Qualcomm again extended its $44 billion offer to buy NXP and now says investors have until this Friday to sell to Qualcomm for $127 per share. NXP stock is still trading slightly below that level, and as of last Friday only 10.5% of shareholders had tendered, according to Qualcomm.

 

Qualcomm offered to buy NXP in 2016, three days after meeting with Broadcom. Qualcomm had held merger discussions with both Broadcom and NXP, and management chose to pursue NXP.  The Qualcomm/NXP proposal has been slowly making its way through global regulatory agencies, and Qualcomm has repeatedly extended the deadline for NXP shareholders to tender their shares.

 

In late 2017, Qualcomm received a hostile bid from Broadcom. Broadcom has made it clear that it doesn't share Qualcomm's perception of NXP's value. Broadcom reduced its bid for Qualcomm earlier this year when Qualcomm increased its offer price for NXP from $110 per share to $127 per share.

 

Now that the U.S. government is investigating Broadcom's offer to buy Qualcomm, there's a chance that Qualcomm and NXP could seal their deal this spring before Qualcomm shareholders have a chance to vote on the Broadcom offer.

 

NXP's management has been strongly supportive of the deal with Qualcomm, and is telling employees the deal will go through. NXP hasn't commented publicly on the Qualcomm/Broadcom deal, but an NXP source says the company does not see much synergy between itself and Broadcom. 

 

NXP is interested in growth through business combination, but recently that interest has focused on North America. The Dutch company purchased Freescale Semiconductor for $12 billion in 2015 and soon thereafter started talks with Qualcomm.

 

Qualcomm would give NXP access to one of the world's most valuable patent portfolios, and would give Qualcomm more exposure to markets that are growing faster than the smartphone market, namely vehicle connectivity and the wider internet of things.

 

"The combination brings together a comprehensive set of capabilities," Qualcomm CEO Steve Mollenkopf said recently, adding that NXP "provides us with greater scale in auto, IoT, security and networking with their highly complementary products and world-class sales channel."

 

 

That world-class sales channel has a very strong relationship with Apple, one of NXP's biggest customers. The iPhone maker relies on NXP for embedded security solutions and as Apple drives further into the automotive market it is likley to extend its relationship with NXP. This is not lost on Qualcomm, which has lost billions in market value as its own relationship with Apple has soured.