Qualcomm’s Ends Two-Year, $44B Bid for NXP After No Word from China
Qualcomm finally ended its almost two-year bid to acquire Dutch semiconductor maker NXP for as much as $44 billion last night, after it didn’t receive word from Chinese regulators about whether the deal, which was subject to global regulations, would gain approval. Instead, San Diego-based Qualcomm said it plans to repurchase $30 billion of shareholder stock.
The lack of approval from the Chinese government was not taken well in the U.S., with speculation that it was related to the escalating trade feud between the two countries. A spokesman for the Chinese Commerce Ministry said the actions by China about Qualcomm and NXP had nothing to do with the trade issues, according to The New York Times.
“I’m very disappointed that they didn’t get regulatory approval,” U.S. Treasury Secretary Steven Mnuchin told CNBC in an interview. “It was approved in every single other territory. We’re just looking for U.S. companies to be treated fairly.”
Qualcomm (NASDAQ: ticker:QCOM]]) originally announced its agreement to buy NXP in October 2016, believing the combined entity could use each company’s individual expertise—Qualcomm as a chipmaker for smartphones, NXP (NASDAQ: NXPI) as a maker of a broad range of chips, for use in everything from devices for automobiles to networking systems. The broader goal was to make an impact in the Internet of things (IoT) and connected world.
But the companies apparently didn’t do enough to get the approval of Chinese antimonopoly regulators, who had a say in the deal because of the amount of business both companies do in the country, according to The New York Times. Because Qualcomm hadn’t heard from the regulators as of 11:59 p.m. Wednesday in New York, the company decided to cancel the deal.
That meant Qualcomm had to pay NXP a $2 billion breakup fee this morning. NXP plans to begin a $5 billion share repurchase program, according to a securities filing.
NXP was attractive for a company like Qualcomm, which is the world’s biggest supplier of smartphone chips and other components, because it diversified the business beyond the mobile market, where growth has slowed, according to a report from Reuters.
Shares of Qualcomm rose this morning on the news to $61.50 as of 10:28 a.m. in New York, up 3.5 percent from yesterday’s close. NXP shares, meanwhile, dipped to $91.50 as of 10:30 a.m., down 7 percent from the close of the market July 25. The acquisition would have valued NXP shares at $127.50 apiece.