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Can Qualcomm Close This NXP Semiconductors Merger Anytime Soon?

By Anders Bylund - Feb 16, 2018 at 4:11PM

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Qualcomm still hopes to complete the deal shortly, with just one more regulatory approval left unsigned.

Chip giant Qualcomm (QCOM 4.17%) has updated its tender offer for every share of automotive computing expert NXP Semiconductors (NXPI 3.79%) again. The number of shares committed to Qualcomm's $110 all-cash offer per NXP have been dwindling over the last year, with a temporary respite in October.

Let's have a look at the new state of affairs.

By the numbers

When NXP shareholders commit their stubs to Qualcomm's offer, the shares may be withdrawn at any time. Here's the latest tally:

Offer Update

NXP Shares Tendered

% of Shares Tendered

February 2018

5.3 million

1.5%

January 2018

5.7 million

1.7%

December 2017

6.6 million

1.9%

November 2017

8.1 million

2.4%

October 2017

12.3 million

3.6%

September 2017

10.9 million

3.2%

August 2017

23.5 million

6.9%

July 2017

25.6 million

7.6%

June 28, 2017

42.2 million

12.5%

June 1, 2017

47.7 million

14.1%

May 2017

50.3 million

14.9%

April 2017

54.8 million

16.3%

March 2017

58.0 million

17.2%

February 2017

49.6 million

14.8%

Data Source: Qualcomm.

What's new?

Qualcomm reported the updated numbers without any commentary or background material, a common practice since last summer. European regulators gave their final thumbs-up four weeks ago, removing one of the last remaining roadblocks and setting the stage for a quick South Korean approval. At this point, only China hasn't given the go-ahead for Qualcomm to complete its NXP buyout.

Beyond this, the only additional detail would be the fact that this extension of the tender offer will expire at the close of business on Feb. 23. That's actually noteworthy, because Qualcomm's tender offer renewals have been arriving in monthly intervals so far. This time, it's just a two-week gap. Does this indicate a greater chance that the deal could be completed before this expiration? I hesitate to make that suggestion, because it flies in the face of lukewarm investor interest, but can't deny that it looks like a logical explanation.

"The transaction is expected to close in early 2018," according to the press materials -- a verbatim quote from the January update. It's still pretty early, so I might not be wrong after all.

Woman creating a wall mural of a large yellow fish swallowing a smaller yellow fish.

Image source: Getty Images.

What's next?

According to Qualcomm CFO George Davis, Qualcomm could complete this deal very quickly following Chinese approvals, putting down the final John Hancock as soon as three weeks later.

Shareholders might disagree, though. Activist analyst firm Elliott Advisors continues to push for a higher closing price, looking for a final price tag north of $135 per share. NXP shares continue to trade above Qualcomm's committed $110 offer per share, clocking in at $118.50 on Feb. 16. Meeting Elliott's demands would add another $8.5 billion to an already huge $38 billion deal price, and Qualcomm would need to come up with that additional cash somehow -- or add a share-based component to this all-cash agreement.

But that idea could actually work in Qualcomm's favor. The company is battling a hostile takeover attempt by fellow chip designer Broadcom (AVGO 2.52%). Overpaying for NXP on purpose could drive that unwelcome suitor away. Qualcomm would be cutting off its nose to spite its face, sure, but stranger things have happened. This type of move would involve an even larger increase than the $135 per share suggested by Elliott Advisors.

This three-way merger drama will play out one way or another in the next couple of months, and it's not at all obvious how the play will end. Take a seat; I'll bring the popcorn.

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Stocks Mentioned

NXP Semiconductors N.V. Stock Quote
NXP Semiconductors N.V.
NXPI
$159.32 (3.79%) $5.81
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
QCOM
$125.10 (4.17%) $5.01
Broadcom Limited Stock Quote
Broadcom Limited
AVGO
$509.09 (2.52%) $12.51

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