China's Ministry of Commerce antitrust review, strong NXP stock performance giving shareholders cold feet.
SAN FRANCISCO — Qualcomm entered into a new amended acquisition agreement with NXP Semiconductors worth $44 billion, in a move that may cause Broadcom to abandon its hostile takeover attempt of Qualcomm.
Qualcomm said Tuesday (Feb. 20) that the new deal to acquire NXP is worth $127.50 per share in cash, up from the initial $110 per share price that the companies agreed to 16 months ago. The new deal, which was agreed upon by the boards of directors of both companies, also reduces the minimum tender offer condition to 70 percent of NXP shares from 80 percent, lowering the bar for shareholder approval that would cement the deal.
Qualcomm’s acquisition of NXP, first announced in October 2016, has been cleared by most antitrust review agencies throughout the world. However, the deal is still awaiting the seal of approval from China’s Ministry of Commerce. Sign off from China was reportedly expected sometime this month, although some reports have since suggested that the approval may take even longer to secure.
Thus far, the deal hasn’t come anywhere close the threshold of 80 percent of shares tendered that the original agreement required. However, Qualcomm said Tuesday that it has entered into binding agreements with nine NXP shareholders who collectively own more than 28 percent of NXP’s outstanding shares.
Qualcomm was forced to sweeten the deal partly because of NXP’s financial success and stock performance in the time since the proposed acquisition was announced. Several large institutional shareholders have said publicly in recent months that they would not support the acquisition at the original purchase price, which totaled roughly $38 billion. But the revised deal could cause Broadcom to withdraw its $121 billion bid to acquire Qualcomm, a proposal that Qualcomm’s board has twice voted unanimously to reject.
Steve Mollenkopf, Qualcomm’s CEO, said through a statement that work on the integration between of the two companies continues even as the process of securing regulatory approval has plodded along slower than initially expected.
“With only one regulatory approval remaining, we are working hard to complete this transaction expeditiously,” Mollenkopf said. “Our integration planning is on track and we expect to realize the full benefits of this transaction for our customers, employees and stockholders.”
Broadcom initially offered about $104 billion to acquire Qualcomm last year in what would be one of the largest tech acquisition agreements of all time. When that offer was rejected by Qualcomm’s board, Broadcom launched a hostile takeover attempt, nominating directors to Qualcomm’s board in advance of Qualcomm’s annual stockholder meeting next month.
Broadcom earlier this month raised its offer to Qualcomm to $121 billion and included in its acquisition prospal an $8 billion “reverse break up fee” intended to compensate Qualcomm in the event that the acquisition is not cleared by regulators. Qualcomm has said that it faces substantial risk of losing licensing and product revenue if it agrees to a deal that is ultimately not completed because of regulators.
Qualcomm and Broadcom met last week to discuss Broadcom’s revised offer, which was rejected by Qualcomm. While the company said the meeting was productive and that it would be open to future talks, Qualcomm’s board of directors once against rejected the deal saying it undervalues Qualcomm and would be risky.
Broadcom said at the time of the revised offer that the proposal would remain in effect until Qualcomm completed its acquisition of NXP or until Qualcomm’s annual stakeholder meeting next month.
Broadcom said Tuesday that it was “evaluating its options” after the new agreement between Qualcomm and NXP.
— Dylan McGrath is the editor-in-chief of EE Times.