Qualcomm Extends Cash Tender Offer for NXP Semiconductors – September 27, 2017

U.S. mobile chipset giant, Qualcomm Inc. (QCOM Free Report) recently announced that Qualcomm River Holdings B.V., an indirect wholly owned subsidiary of Qualcomm, has extended the offering period of its previously announced cash tender offer of purchasing all the outstanding common shares of NXP Semiconductors N.V. (NXPI Free Report) . The tender offer is now scheduled to expire at 5:00 p.m., New York City time, on Oct. 20, 2017.

Qualcomm’s proposed acquisition of Netherlands-based mobile chipset giant NXP Semiconductors is facing a few problems. On Oct 27, 2016, the company entered into a definitive agreement with NXP to buy the latter. Per the deal, Qualcomm would bel paying $110 per NXP share in cash reflecting an enterprise value of approximately $47 billion (equity value of $39 billion) for the Dutch chipset maker. The deal is likely to be closed by the end of 2017 subject to all necessary regulatory approvals.

Meanwhile, hedge fund Elliott Management Corp. and two other large shareholders of NXP have approached the company to renegotiate the terms of the deal, which they consider grossly undervalued. In August 2017, Elliot Management disclosed that it had accumulated shares and derivatives amounting to a 6% stake in NXP Semiconductor. Majority of the company’s shareholders are now reluctant to tender their shares at the rate specified by Qualcomm.

Consequently, NXP’s outstanding shares tendered have declined from 17.2% in March 2017 to just 3.2% in September. Notably, at least 70% of NXP’s total outstanding shares must be tendered to Qualcomm for the deal to go through. Hence, the deal looks quite unlikely unless Qualcomm adds some sweeteners.

Meanwhile, in June 2017, the telecom regulatory body of the European Union, the European Commission (EC), launched a thorough investigation into the proposed acquisition. The EC will probe in depth to see if the deal will lead to higher prices, exclusion of rival chipset suppliers and reduced innovation in the semiconductor industry.

The merged entity is likely to command strong market positions with an extensive portfolio of baseband chipsets and chips for near-field communications. The EC has a time limit of 90 working days, till Oct 17, 2017, to take a decision. Notably, the proposed merger has already been approved by the U.S. antitrust authorities.

NXP Semiconductors is the largest manufacturer of high-performance, mixed-signal mobile chipsets with 14% market share. The…

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