Qualcomm Abandons Bid For NXP After Chinese Refusal

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Announces massive share repurchase program and agrees to halt pursuit of Dutch chipmaker

Qualcomm has abandoned its $47bn cash (£38.5bn) bid to acquire Dutch chip maker NXP Semiconductors.

The American chipmaker reached its decision after it failed to achieve necessary approval of the deal from Chinese regulators.

Earlier this year Qualcomm itself survived a hostile takeover bid from Broadcom, which has its origins in Singapore. President Donald Trump had blocked that deal on national security grounds.

NXP V2X demo2

Deal termination

And now in its third quarter results announcement, the firm revealed its decision to halt its acquisition of NXP and return value to shareholders.

“We reported results significantly above our prior expectations for our fiscal third quarter, driven by solid execution across the company, including very strong results in our licensing business,” said Steve Mollenkopf, CEO of Qualcomm.

“We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending any new material developments,”he added. “In addition, as previously indicated, upon termination of the agreement, we intend to pursue a stock repurchase program of up to $30 billion to deliver significant value to our stockholders.”

Cancellation of the deal, and the return of cash to shareholders will no doubt please investors, as Qualcomm had intended to pay an eye watering $47bn in cash (£38.5bn) or $110.00 per NXP share in an effort to create an IoT semiconductor powerhouse.

Before that deal had been mooted, NXP had a market value of about $28.5 billion (£22bn), while Qualcomm was worth approximately $93 billion (£72bn).

Chinese regulators

NXP Semiconductors is a Dutch firm that employs roughly 45,000 people in more than 35 countries around the world. It makes a range of chips including those used in contactless payment systems, and is considered to be a leading chip suppliers to the automotive industry.

It notably acquired Freescale Semiconductor last December, which bolstered its automotive credentials.

And while Qualcomm had reportedly secured the necessary regulatory approvals in eight of nine countries to acquire NXP, the Chinese regulators failed to approve the deal.

Qualcomm needed China’s approval because it accounted for nearly two-thirds of its revenue last year, according to Reuters.

A deadline for the transaction was set for 11:59pm (03:59 GMT) New York time under the agreement, but this has now lapsed.

Qualcomm will have to pay a $2 billion (£1.5bn) deal breakup fee to NXP.

Trade war

The deal cancellation due to Chinese refusal comes amid a growing trade war between the United States and China.

It all began when US President Donald Trump threatened to place tariffs on all $500bn of Chinese imports into the United States.

In June President Trump vowed to utilise a strengthened security review process in an effort to deal with the ‘threat’ posted by Chinese firms acquiring US technologies and companies.

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Author: Tom Jowitt
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